Bill Shorten’s pledge to end the current negative gearing rules for investors still doesn’t have a start date and senior MPs doubt it will pass the Senate even if he wins the next election.
The limbo over the start date leaves the door open for Labor delaying the introduction while the property market remains volatile and house prices are falling in Sydney.
Senior Labor frontbenchers stress that the ALP remains strongly committed to the policy, which survived sustained attacks at the last election.
But the crucial question of when it would actually start remains a secret.
Just months before the election, the Labor Party is still refusing to say when the nominal start date for the changes to ban future investors from negatively gearing existing properties will commence, describing the key question as “to be determined”.
“It will likely be July 2019,” a Labor frontbencher told The New Daily.
“But the more interesting thing is, can we get it through the Senate?
“Let’s assume the election is in May, the Parliament won’t resume until August or September.
“I think it will be a very difficult Senate. The changes that the Liberals introduced – there will be fewer Greens. They will lose as many as three seats. There will be fewer independents.
“We can announce a date, say July 1, 2019 but I don’t think we are going to get it through. We’ve got to get 39 votes.”
While the Labor Party remains strongly committed to the policy, there are calls for the ALP to delay the introduction while the housing market remains volatile in Sydney and Melbourne.
Labor confident scare campaign isn’t working
In recent weeks, Treasurer Josh Frydenberg has ramped up the scare campaign over Labor’s negative gearing policy.
His key attack line is that the changes could see $75,000 wiped off the value of the average home in Sydney or Melbourne.
Mr Frydenberg told The New Daily the policy was a “big risk”.
“It [the house price falls] could be up to 9 per cent in some places. You’ve got a whole range of institutions who have said this will have a very negative impact,” he said.
“The policy was constructed at a different time.
“They say they are grandfathering existing houses that are negatively geared. Well, every time those people sell they are selling into a market that is smaller with fewer buyers.
“Bill Shorten has been saying he doesn’t want to see first-home buyers competing with investors? But first-home buyers will be competing with investors for new properties.”
But Labor is confident the campaign isn’t working. It disputes Mr Frydenberg’s claims that two-thirds of negative gearers have a taxable income under $80,000 as misleading because it doesn’t reveal the taxpayer’s actual income before it is reduced by negative gearing.
When that is factored in only 52.3 per cent of investors have incomes under $80,000.
“No amount of silly videos will make a misleading scare campaign a truthful one,” Labor’s treasury spokesman Chris Bowen said.
After the Finance Minister Mathias Cormann recently said Australia should “let the market operate” and it was “good” that prices are rebalancing, Mr Bowen accused the Liberals of contradicting themselves.
“Official Liberal position: If house prices fall under the Liberals it’s good. If house prices fall under Labor, it’s the end of the world,” Mr Bowen said.
“That clears it up.”
Shorten plans to ‘grandfather’ changes to protect existing investors
Current negative gearing arrangements allow investors to claim a loss from a residential property’s rental income due to loan interest repayments.
Investors can also claim a 50 per cent discount on the tax payable on any capital gains accrued from the sale of a property.
Labor also proposes reducing that capital gains discount from 50 per cent to 25 per cent.
Mr Shorten’s changes will “grandfather” existing property investors, which means the 1.3 million Australians who currently negatively gear can continue to do so.
For future investors, Mr Shorten proposes banning negative gearing for existing properties but allowing it for new homes to encourage an increase in the supply of new houses to rent and buy.
Crossbencher Derryn Hinch says he will vote for it
Key crossbencher Derryn Hinch told The New Daily he was open to supporting Labor’s negative gearing changes – if they are presented to the current Senate.
“For yonks I resisted changing it. I own one negatively geared property,” he said.
“Now I know of one senator who owns more than 20 negatively geared properties. Not what was intended.
“I agree that nurses and cops own such properties. My view is that I would vote for the ALP changes if grandfathered, but I would limit negatively geared properties to two or three.”