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The Australian Capital Territory is the nation's biggest loser, according to a new analysis of tax statistics, with Western Australia a close second.
The Grattan Institute says an extraordinary 13 per cent of ACT taxpayers were negatively geared in 2012-13. In Western Australia, the figure was 11.3.
By contrast in NSW, Victoria and South Australia the figure was 9.5 per cent. In Tasmania only 4.6 per cent of taxpayers negatively geared.
Nationwide, around 10 per cent of taxpayers lost money as landlords in order to negatively gear, meaning, in the word's of the Institute's chief executive John Daley, "the remaining 90 per cent were paying more tax so they could pay less tax."
The Institute finds only 6 per cent of taxpayers earning less than $50,000 negatively gear. In contrast around 22 per cent of taxpayers earning more than $50,000 negatively gear. In the ACT and Western Australia negative gearing was even more common among high earners with 26 per cent and 25 per cent of those earning more than $150,000 negatively gearing.
At the National Press Club on Wednesday treasurer Scott Morrison argued that the "vast majority of Australians who use negative gearing are modest-income-earning Australians; nurses, teachers, police".
"I know the Labor Party doesn't agree with that and there are probably some in this room who don't agree with that," he said. "But the figures speak for themselves. Two-thirds of those who use negative gearing have a taxable income of $80,000 or less."
Mr Daley confirmed the figure but said most taxpayers earned nothing like $80,000.
"The Treasurer is saying 33 per cent of negative gearers earn more than $80,000. Among all taxpayers only 20 per cent earn more than $80,000," he said.
Surgeons and anaesthetists were twice as likely as nurses to negatively gear and on average lost $4200 and $3400 per year compared to $250 for nurses.
The figures used by both Mr Daley and the Morrison are for taxable incomes, meaning they understate what negative gearers earn before negative gearing is used to reduce their taxable incomes.
A crude analysis of unadjusted incomes suggested that around 70 per cent of the benefits of negative gearing went to the top 20 per cent of earners.