Labor pledges no change to negative gearing, CGT discounts
Labor pledges no change to negative gearing, CGT discounts
Opposition Leader Anthony Albanese has taken negative gearing off of the federal election agenda, saying there will be no change to the much-used tax deduction strategy if Labor is successful at the next poll.
Mr Albanese and Shadow Treasurer Jim Chalmers today announced that Labor would deliver the same tax cuts as the Morrison government has pledged to more than 9 million Australians.
The commitment comes after plans to abolish negative gearing were a key feature of Labor’s previous policy agenda under former leader Bill Shorten, who was unsuccessful in the last federal election in 2019.
Today’s promise to deliver the Liberal party’s legislated tax cuts, as well as making no changes to negative gearing and capital gains tax, would provide certainty for voters after a challenging two years, Mr Albanese said.
While Prime Minister Scott Morrison has not yet set a date for the next federal election, the nation is due to go to the polls at any time between August 7 and May 21 next year.
Property Council of Australia chief executive Ken Morrison said Labor’s previous approach to negative gearing and capital gains tax would have likely hurt the Australian economy, cost construction jobs and made little impact on housing affordability.
He said research by Deloitte Access Economics, commissioned by the Property Council prior to the 2019 election, showed the policy would have cut $1.5 billion of GDP, given the construction sector a $766 million hit and would not meet the objectives of increasing housing supply and improving affordability.
“The Opposition’s previous position on negative gearing and capital gains tax was always the wrong policy, at the wrong time, and voters at two elections knew it,” Ken Morrison said.
“Deloitte Access Economics’ comprehensive analysis showed that the policies would have failed the policy tests set out for it.
“The vast majority of property investors are not rich property barons – they are everyday Australians looking to get ahead and provide the rental accommodation that is needed by the one-third of households who rent.
“ATO data shows that 71 per cent of investors own just one investment property and 19 per cent own just two, while 47 per cent of investors are women.
“This decision means that policy makers can focus on measures that will make a material difference to the pressing challenge of housing affordability and the Property Council looks forward to contributing to that focus.”
Urban Development Institute of Australia national president Simon Basheer said with Australia still needing economic stimulus due to the economic impacts wrought by the COVID pandemic, Labor’s decision to ditch its prior plans for negative gearing and capital gains tax discounts was the right move.
“Full credit to the opposition for being willing to adjust its policies and recognise that investors have a crucial role to play in sustaining the vast bulk of the nation’s rental market,” Mr Basheer said.
“The policy stability now on offer will be a boost to the housing and construction sector, which has been so crucial to sustaining Australian jobs and wages through the economic downturn from COVID-19.
“Negative gearing in particular was always a straw man in the debate about housing affordability, given no serious modelling showed its abolition would substantially drop house prices.
Mr Basheer said negative gearing had been a feature of Australia’s tax system for more than 100 years, meaning any notion that it was responsible for any recent increases in house prices was wide of the mark.
“Now that we have a consensus on the settings for negative gearing and the capital gains tax discount, the task should be to focus on real solutions that will fix housing affordability woes,” he said.
“Poor strategic planning, deficient land supply, inefficient planning systems and excessive state and local property taxes should be prioritised for reform.
“Ultimately, until we get a better balance between supply and demand and act to reduce the cost of new housing, the dream of home ownership will remain challenged.”
Master Builders Australia chief executive Denita Wawn said Labor’s promise was good news for the building industry, the nation’s economy as well as the wider community.
“This announcement shows the opposition’s recognition that new home building and increasing home ownership is vital to economic recovery and people’s financial security,” Ms Wawn said.
“With a federal election looming, the opposition’s acknowledgement that restricting negative gearing and increasing capital gains tax would undermine housing supply, jobs and sabotage economic recovery is timely.”
Housing Industry Association managing director Graham Wolfe said property investors would be particularly encouraged by Labor’s announcement.
“Private rental housing plays a critical role in Australia’s housing supply continuum,” Mr Wolfe said.
“Without a reliable pool of residential investors across Australia, hundreds and thousands of households would find it harder to put a roof over their heads.
“Australians need to have the ability to access affordable housing, whether as a renter or as an owner-occupier.”
Real Estate Institute of Australia president Adrian Kelly welcomed the certainty from Labor, particularly against the backdrop of 12 million Australians currently in lockdown.
Mr Kelly said many ‘mum and dad’ investors had borne the economic costs of rental eviction moratoriums and thanked the Labor party for listening to the real estate industry.
“Continuing to support successful tax settings that encourage investment has assisted investors throughout the COVID-19 pandemic and is most welcome in a time of great uncertainty,” Mr Kelly said.
“We also do not want CGT to become overly punitive and disincentivise and discourage households from rightsizing.
“This will particularly be the case as Australia’s population ages.”