Treasurer says ALP plan to end negative gearing on existing homes would hurt first home buyers who would be ‘crowded out’ by wealthy investors

This article is more than 4 years old

This article is more than 4 years old

Scott Morrison has criticised Labor’s new policy to end negative gearing on existing homes and cut capital gains tax concessions but suggested the Coalition was also “keeping an open mind” on tax reform ahead of the budget.

“I have always believed that negative gearing gives hard-working Australians a chance to build some wealth they would not otherwise get,” the treasurer wrote in an opinion piece for News Ltd.

“The government is keeping an open mind on this issue as we prepare this year’s budget.”



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His comments come as Galaxy polling in the Sunday Telegraph found most Liberal and Labor voters (57%) support limiting tax concessions for superannuation contributions over a GST rise (24%) or changes to negative gearing (39%).

As the government is preparing its first budget under Malcolm Turnbull, the Coalition is struggling to lead the tax debate – all but ruling out a GST rise but leaving everything else “on the table”.

The opposition leader, Bill Shorten, announced the tax policy – which he said would save $32bn over a decade – at the NSW Labor conference on Saturday.



Under Labor’s negative gearing policy, investors would get access to negative gearing only for new housing stock, such as greenfield sites.



Further, capital gains tax concessions – the discount on the tax paid on the profit made when an asset is sold – would be reduced under Labor from 50% to 25%. The family home would continue to be exempted. Neither policy would be retrospective.



On Sunday Chris Bowen rejected suggestions that it would make it harder for first home buyers and he urged voters to help build housing supply and return fairness to the market.

“We’re flagging our intentions very early and clearly so they can be taken into account in a proper way and of course so that the Australian people can vote on competing plans at the next election,” Bowen said on ABC Insiders on Sunday. “So far we’re the only side turning up at the election with any plans.”

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Morrison said Labor’s plan would raise only $600m in the first four years. Labor said the policy was designed to have greater impact in later years because it was not retrospective.

Morrison claimed rents would rise as investors disappeared from the existing housing market and first home buyers would have to compete with investors for new home sites.



“Investors accessing negative gearing will now have only one option in the housing market, and if you’re a first home buyer looking to buy a new home you’ll be competing with all of them,” Morrison said.



Morrison said there was a challenge to ensure the planning system (run by the states) enabled more housing to be built and ensure there was sufficient housing stock available for the 30% of households who rent.

“For the mums and dads, nurses, teachers, police, small business owners and others on ordinary incomes who wish to use negative gearing in the future to give themselves a go at building wealth for their retirement, they will have to compete with more wealthy investors for a much smaller pool of housing stock, crowding them out of the opportunity they have right now,” he wrote.

Bowen dismissed suggestions that the benefits of negative gearing go to ordinary households, saying half the benefit goes to the top 20% of income earners.



“This is a big, bold policy reform which puts first home buyers on a more level playing field,” Bowen said.

“At the moment, first home buyers turn up at an auction with very little government support. People buying their second, third and 10th home have negative gearing and the capital gains tax discount which combined are the most generous tax incentives in the world.

“When you have the budget pressures we have, when you have the housing affordability crisis we have, that’s not fair, it’s not sustainable. The capital gains tax is one of the fastest-growing concessions in the federal budget. We’re the only party with a policy to get it under control.”