18/10/2024

Treasurer Jim Chalmers has refused to rule out changes to negative gearing and the capital gains tax discount while analysis commissioned by the Greens from the Parliamentary Library has found that more than 774,000 renters could become homeowners if tax concessions for property investors were scaled back.

Under sustained questioning on ABC Radio National, the Treasurer refused to rule out changes to the tax concessions, following a familiar script of non-denials akin to what the government said before announcing changes to the Stage 3 Tax Cuts.

In 2017, now-Treasurer Jim Chalmers told the Parliament that dealing with negative gearing and the capital gains tax concessions was “the most meaningful lever when it comes to dealing with housing affordability,” and said that without dealing with the taxes that the government would “not do anything meaningful about housing affordability”.

It comes as analysis, completed by the Parliamentary Library and commissioned by the Greens, combined NSW Treasury research and census data to show the impact of winding back negative gearing and capital gains tax concessions on home ownership.

The Parliamentary Library’s analysis of the NSW Treasury research shows that even the modest changes to negative gearing and the capital gains discount that Labor proposed in 2019 would lead to an estimated 296,900 extra homes being owned by owner-occupiers rather than property investors. The analysis reveals that 774,000 renters could be brought into home-ownership.

Labor’s 2019 policy included halving the capital gains tax discount for property investors and restricting negative gearing to newly built properties only. 

More significant changes to negative gearing and the capital gains tax discount, such as the Greens having been calling for over successive election cycles, could mean even more investment properties freed up for renters and first home buyers. 

Negative gearing and the capital gains tax discount for property investors help property investors to outbid first home buyers, meaning it is easier for a wealthy investor to buy their seventh house than it is for someone to buy their first.

The Greens have called for changes to negative gearing and the capital gains tax discount among their housing asks in exchange for support on Labor’s ‘Help to Buy’ legislation. 

Under pressure from the Greens, Labor MPs have been pressuring Labor to act on capital gains and negative gearing (source: 1 | 2 ) while a “growing number of coalition MPs push Peter Dutton to consider their own property tax changes”.

On Wednesday, a Senate inquiry heard evidence from the Australia Institute’s economists that removing the distortions like the Capital Gains Tax discount is a must for housing affordability, blaming these tax concessions for encouraging speculation, driving dramatic house price rises since 1999 and rigging the market in favour of investors over renters and first home buyers.

Lines from Max Chandler-Mather MP, Greens spokesperson for Housing and Homelessness:

“If Labor worked with the Greens to phase out negative gearing and the capital gains tax discount we could change the lives of over 770,000 renters, and finally start to tackle the scale of this massive housing crisis.”

“A broad national consensus of economists, housing experts and even Labor and Liberal MPs is building that it is time to scrap these destructive tax handouts, and increasingly the biggest blocker to meaningful change is a property investor Prime Minister.” 

“Millions are suffering through this devastating housing crisis and all the Greens are suggesting is Labor stop giving billions of dollars to wealthy property investors and instead start making meaningful change to the lives of those doing it tough.”

“These tax handouts might help property investors like the Prime Minister to buy up multi-million dollar mansions, but they are locking out over 770,000 renters out of home ownership by driving up prices and rigging the system in favour of banks and landlords.”

“People like the Prime Minister and Peter Dutton had the chance to buy an affordable home in the 90s when they were young, and all the Greens are pushing for is meaningful reform that ensures the next generation gets that same chance.”

“When 75% of Labor and 65% of Liberal MPs own investment properties, and keep voting in favour of policies which benefit their portfolios but lock hundreds of thousands of renters out of home ownership, it’s no wonder people are furious.”

“The Greens are ready to work with Labor to negotiate a meaningful plan to fix this broken system and help the millions of people who have otherwise given up on owning a home.”

ABC Radio National interview with Treasurer Jim Chalmers, Friday 18 October:

PK: So is that it with negative gearing it's you're not going to touch it. 

TREASURER: Oh we've made it really clear. You know it's not part of our housing policy. 

PK: You know and we've got right now I mean I know the language. I've studied this as you know, it's right now, I know it's not your policy, but do you think you should change it? 

TREASURER: No, I understand that. And we go back and forth. I've been asked countless times about this. People shouldn't anticipate that this is part of our housing policy. 

PK: It's not even if it's a good idea. 

TREASURER: We've got better ideas on housing. You know, we've got better ideas, you know, funding, land release and small infrastructure. The help to buy scheme, lots more public housing to free up the market for others. You know, we've got a heap of other better ideas and that's why we're pursuing those and trying to legislate them. 

Treasurer Jim Chalmers on negative gearing and capital gains tax discount, from 2017 debate in Parliament:

“What is even worse is that these bills show what the government are not prepared to do: they are not prepared to pull the most meaningful lever when it comes to dealing with housing affordability, and that is dealing with negative gearing and the capital gains tax concessions. They refuse to pull the lever. They will not do anything meaningful about negative gearing and capital gains, and, as a consequence, they will not do anything meaningful about housing affordability in this country, particularly for young people.” (reference)

Evidence from Financial regulatory framework and home ownership Inquiry, public hearing 16 October 2024

Greg Jericho, Chief Economist, The Australia Institute:

“Removing that distortion, of Capital Gains Tax, is a must. [...] They [first home-buyers] are competing in a rigged game against investors who have got the taxation system on their side”

Matt Grundoff, Senior Economist, The Australia Institute:

“Over the past 20-25 years what we have seen is a massive new source of demand enter the market and investors have gone into the market, they have outbid owner occupiers, we have seen the proportion of investment properties and therefore renters increase over that period, and effectively they’re the demand that has been pushing up prices. The reason they can do that is because of these tax concessions, the capital gains tax discount set it off in 1999 and combined with negative gearing they are allowing investors to enter the market [...] actually encouraging more speculation to come in, and that rapid rise in price has encouraged more investors into the market.”