Negative Gearing: Albanese Government Considers Bold Housing Policy Move

The Albanese government has reportedly asked Treasury for expert advice on the potential changes to negative gearing and capital gains tax concessions. This move, which comes after years of dispute over billions of dollars in annual tax benefits, could significantly impact housing affordability and potentially define the upcoming federal election.

The government's consideration of these changes comes after a push from the Greens who demand an end to the tax breaks, while the Liberals warn against a hit to investors.

A senior Labor official, who requested anonymity to speak freely about internal policy development, confirmed the request for modelling on the potential change to negative gearing. The official also revealed that the modelling could canvass changes to concessions on capital gains tax.

This news follows reports of the Greens leader Adam Bandt spurning a deal on housing policy in the Senate, prompting Opposition Leader Peter Dutton to call on the government to “be honest” about its plans.

The Government's Position and Potential Implications

Despite widespread speculation, Prime Minister Anthony Albanese initially dismissed questions about negative gearing, citing the Property Council of Australia's claim that changing negative gearing would negatively impact housing supply. However, he did not rule out any options.

When pressed further, Albanese acknowledged that the government values the public service and that they often consider various policy ideas. However, he emphasized that the government's current housing policy remains unchanged.

Treasury is reportedly looking at different proposals compared to those put forward by former leader Bill Shorten in 2016 and 2019. These proposals would have limited the use of negative gearing to new properties only and reduced the capital gains tax concession from 50 per cent to 25 per cent.

The government's proposed changes are said to be more nuanced, potentially involving a cap on the number of properties a taxpayer could negatively gear, rather than a complete elimination. These changes would be grandfathered and not affect anyone currently negatively geared.

Political Implications and Potential Backlash

The potential changes to negative gearing have sparked debate within the Labor party. While some believe it won't impact their voter base, others fear a backlash from those who would see their taxes increase.

The Coalition is preparing for a scenario where Labor implements a significant change to negative gearing, drawing parallels to John Howard's introduction of the GST in 1998.

The Complexities of Negative Gearing and Capital Gains Tax

Negative gearing allows investors to claim deductions on their income tax for the expenses associated with owning an investment property. This allows them to save on tax while the property could gain in value. They also benefit from a concession on the capital gains tax they would owe upon selling the property.

Critics argue that negative gearing fuels housing demand, driving up prices for everyone. Supporters argue that it encourages investment in the sector, making it more attractive for builders and increasing the supply of rental properties.

The Importance of Supply in the Housing Crisis

Despite the debate around negative gearing, both the government and the housing industry agree that the key to solving the housing crisis is increasing supply.

The Albanese government has implemented policies like the Build to Rent scheme and the Help to Buy policy to boost housing supply, but these have faced hurdles in the Senate. It remains to be seen whether the government will push forward with these policies or if it will prioritize a more significant shift with potential changes to negative gearing.

Ultimately, the government's decision on negative gearing will have significant implications for the housing market, affordability, and the upcoming federal election. Whether they choose to act on this issue or not, it will remain a central focus of the political discourse.

The Future of Housing Policy

The debate surrounding negative gearing and capital gains tax concessions reflects the ongoing struggle to address Australia's housing affordability crisis. The government's commitment to increasing supply is crucial, but whether it will also take on the more contentious issue of tax concessions remains to be seen. The impact of any potential changes on the housing market and the political landscape will be closely watched in the coming months.