Liberal MP John Alexander, who is leading a backbench push for action on housing affordability, has urged the government not to abandon the “frustratingly obvious” reform of curbing landlord tax perks.
In an interview with The New Daily, the Member for Bennelong – whose electorate has the nation’s fastest-growing house prices – said property investors have “dominated the market and eliminated the home buyer”, especially first-time buyers like his own 25-year-old daughter.
“In an ideal world, the investor is going to provide affordable rental accommodation for those who can’t afford to buy, not trample on the opportunities of Australians buying their first house.”
Prime Minister Malcolm Turnbull, Treasurer Scott Morrison and Finance Minister Mathias Cormann have all denied a report in The Australian Financial Review that the government is planning to constrain the capital gains discount for property investors in the May budget.
When asked about it during Question Time, Mr Turnbull told Parliament his government “has no intention or plan to change capital gains tax or negative gearing”.
Mr Morrison echoed this, saying Labor’s plan to cut property investor tax concessions “is ripping away the affordability
Australian tax law allows two concessions that many experts agree are distorting the market. Combined, they cost the budget $11 billion a year, The Grattan Institute estimated.
The first, negative gearing, allows investors to lower their tax bill by deducting the costs of owning a rental property, such as mortgage interest payments, council rates and insurance, from their taxable income, while the second, the CGT concession, allows landlords to pay tax at their marginal rate on only 50 per cent of the capital gains they realise when they sell the property.
After years of silence, the Labor Party promised at the last election to halve the CGT discount from 50 to 25 per cent, and to restrict negative gearing to newly constructed properties.
Mr Alexander described Labor’s negative gearing policy as “very dangerous” as it risked a property market crash, but he backed action on capital gains.
He also advocated giving a federal regulator the power to “control investor appetite” by adjusting tax deductions; allowing Australians to dip into their superannuation to pay for a mortgage; and more transport infrastructure to connect cheaper outer suburbs to cities – such as a high-speed rail between Sydney and Melbourne.
Mr Alexander was formerly the chair of an inquiry into home ownership. He was moved to a different committee before he could release its findings.
After months of delay, the Liberal-dominated committee finally recommended no reforms – an outcome Mr Alexander said would have been “very different” under his chairmanship.
He and other backbenchers are advising Michael Sukkar, Assistant Minister to the Treasurer, who has been tasked with developing the government’s housing affordability policies.
A wide array of experts, including most recently the International Monetary Fund, have warned that landlord tax perks worsen affordability by pushing up prices. Others of this opinion include the Committee for Economic Development of Australia, The Grattan Institute, and The Reserve Bank.
Five Australian cities – Sydney, Melbourne, Adelaide, Brisbane and Perth – were recently named among the top 20 most unaffordable cities with million-plus populations.
Daniel Cohen, co-founder of lobby group First Home Buyers Australia, told The New Daily he supported constraining the CGT concession, but warned that Labor’s negative gearing cuts were “too extreme”.
“At the last election, Labor’s proposed cuts were quite extreme and would’ve had quite a volatile impact on the market, while the Liberals were just playing a scare campaign and being plain lazy,” Mr Cohen said.
“We don’t want to see prices fall. All we want to see is property prices stop going up so fast in the capital cities, because that’s not sustainable or healthy for anyone in the economy, except maybe property developers.”