Advice on negative gearing ‘not out of the ordinary’

Treasury modelling on the impact of changes to negative gearing was passed on due to the issue being “contentious”.

The government has no plans to adjust negative gearing, Treasurer Jim Chalmers says, despite Treasury advice being handed to him on possible changes to the tax concession.

While he did not say whether he directly requested the advice, Dr Chalmers said its provision was not out of the ordinary.

“Sometimes the advice comes unprompted, sometimes it’s sought by me. On this occasion, when there’s a contentious issue in the public domain and we’ve got a severe shortage of housing, of course treasurers get advice from their department,” he told ABC Radio on Monday.

“This is not an unusual thing. This is a treasurer doing his job, but we’ve made it really clear that we’ve got a housing policy already, and (negative gearing) isn’t part of it.”

Negative gearing is where an owner can claim a tax deduction on losses from an investment.

Labor had taken negative gearing reform to the 2019 election, which would have grandfathered tax deductions on investment losses and scrapped the incentive for new investors after a cut-off point.

Prime Minister Anthony Albanese on Thursday said the government had no intention of taking negative gearing changes to the next election, which is due to be held by May 2025.

The treasurer said the debate surrounding housing policy was behind the timing of the negative gearing modelling.

“I got this advice because it was a contentious issue, it was in the public domain and it was a big part of the parliamentary debate as well,” Dr Chalmers said.

The government’s Help to Buy scheme, which would allow for first-home buyers to purchase a property with a lower deposit, has been stalled in the Senate where the Greens and coalition blocked the move.

The Greens had called for the government to make changes to negative gearing in return for their support for the housing proposal, while also urging for a freeze on rent increases.

While there had been calls to make changes to negative gearing, National Shelter chief executive Emma Greenhalgh said further changes to the tax system were needed to make housing more affordable.

“Our current taxation measures detract from revenue which could be more purposefully applied to social and affordable housing,” she said.

“These tax settings have entrenched housing as a wealth generation tool instead of a housing as a primary place of residence and home.”

The peak body called for negative gearing to be limited so losses on investment property could only be written off against other income, while capital gains discounts should be lowered to 50 per cent.

“Changes to the taxation system alone are not the silver bullet, but an intentional design of the taxation system will have considerable impact on creating the type of housing system we want – both now and into the future,” Ms Greenhalgh said.

 

Andrew Brown
(Australian Associated Press)

 

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