Extract from The Guardian
Restricting negative gearing to new homes and reducing capital gains
concessions from 50% to 25% predicted to save about $32bn over next
decade
Labor has promised to end negative gearing on existing homes and cut capital gains tax concessions if it wins the next election.
Labor says the changes would raise $32bn over a decade, help make housing more affordable and generate construction industry jobs.
As Malcolm Turnbull’s government struggles to develop a tax plan and abandons the idea of increasing the GST to fund personal income tax cuts, Labor leader Bill Shorten will today announce the two big, and politically risky, changes.
Taken together with already-announced policies including cracking down on superannuation tax concessions and increasing tobacco taxes, they boost the extra revenue Labor is claiming to pay for election spending promises on things like health and education to $100bn over 10 years.
Speaking to the NSW Labor conference, Shorten will say the current policies on negative gearing and capital gains discounts are expensive drains on the budget that are failing spectacularly in their original aims of boosting new housing stock.
He will point out the concessions cost the government more each year than it spends on higher education, and go almost almost entirely to tax breaks for investments in existing homes.
A Labor government would restrict negative gearing to new houses from July 2017, with existing negatively geared investment properties exempted from the changes.
Capital gains tax concessions – the discount on the tax paid on the profit made when an asset is sold – will be reduced from 50% to 25%, with the family home continuing to be exempted. Shorten says 70% of the discount is claimed by the top 10% of earners, people he says “don’t need it.”
Shorten says the policies will “help level the playing field for first-home buyers, competing with investors ... and ... put the great Australian dream back within reach of working and middle class Australians, who have been priced out of the market for too long.”
When Labor indicated last year it was considering negative gearing changes, then prime minister Tony Abbott ruled out the move, even though the Reserve Bank had suggested it should be considered to help combat debt-fuelled property speculation.
But in his valedictory speech to parliament, former treasurer Joe Hockey endorsed the idea.
“Negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property,” he said.
Malcolm Turnbull has said all tax options remain on the table and the government is looking at negative gearing changes, but treasurer Scott Morrison has repeated the Abbott government’s contention that changing the policy could push up rents and is largely accessed by middle income “school teachers, police officers, nurses and office workers saving and investing to provide for their financial security.”
Shorten cites Grattan Institute data to refute the claim.
“Claims by the government that the benefits overwhelming go to low and middle income earners are incorrect. The government uses income data after tax deductions have been applied. More reliable data which uses gross income shows that the benefits overwhelmingly to higher incomes earners” he says, with finance managers, lawyers, anaesthetists and surgeons actually the professions making most use of the tax break.
And he cites updated research by the McKell Institute that finds the negative gearing change could create 25,000 extra jobs.
“Our new economic policy will encourage the building of thousands of new homes every year and increasing housing supply. It will help lower costs for renters. And it will return the commonwealth budget to a sustainable foundation,” he will say.
The government is now also examining options like cracking down on superannuation tax concessions and negative gearing, but has indicated it wants to use the proceeds to deliver gradual personal income tax cuts rather than to pay for hospitals and schools.
Labor says the changes would raise $32bn over a decade, help make housing more affordable and generate construction industry jobs.
As Malcolm Turnbull’s government struggles to develop a tax plan and abandons the idea of increasing the GST to fund personal income tax cuts, Labor leader Bill Shorten will today announce the two big, and politically risky, changes.
Taken together with already-announced policies including cracking down on superannuation tax concessions and increasing tobacco taxes, they boost the extra revenue Labor is claiming to pay for election spending promises on things like health and education to $100bn over 10 years.
Speaking to the NSW Labor conference, Shorten will say the current policies on negative gearing and capital gains discounts are expensive drains on the budget that are failing spectacularly in their original aims of boosting new housing stock.
He will point out the concessions cost the government more each year than it spends on higher education, and go almost almost entirely to tax breaks for investments in existing homes.
A Labor government would restrict negative gearing to new houses from July 2017, with existing negatively geared investment properties exempted from the changes.
Capital gains tax concessions – the discount on the tax paid on the profit made when an asset is sold – will be reduced from 50% to 25%, with the family home continuing to be exempted. Shorten says 70% of the discount is claimed by the top 10% of earners, people he says “don’t need it.”
Shorten says the policies will “help level the playing field for first-home buyers, competing with investors ... and ... put the great Australian dream back within reach of working and middle class Australians, who have been priced out of the market for too long.”
When Labor indicated last year it was considering negative gearing changes, then prime minister Tony Abbott ruled out the move, even though the Reserve Bank had suggested it should be considered to help combat debt-fuelled property speculation.
But in his valedictory speech to parliament, former treasurer Joe Hockey endorsed the idea.
“Negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property,” he said.
Malcolm Turnbull has said all tax options remain on the table and the government is looking at negative gearing changes, but treasurer Scott Morrison has repeated the Abbott government’s contention that changing the policy could push up rents and is largely accessed by middle income “school teachers, police officers, nurses and office workers saving and investing to provide for their financial security.”
Shorten cites Grattan Institute data to refute the claim.
“Claims by the government that the benefits overwhelming go to low and middle income earners are incorrect. The government uses income data after tax deductions have been applied. More reliable data which uses gross income shows that the benefits overwhelmingly to higher incomes earners” he says, with finance managers, lawyers, anaesthetists and surgeons actually the professions making most use of the tax break.
And he cites updated research by the McKell Institute that finds the negative gearing change could create 25,000 extra jobs.
“Our new economic policy will encourage the building of thousands of new homes every year and increasing housing supply. It will help lower costs for renters. And it will return the commonwealth budget to a sustainable foundation,” he will say.
The government is now also examining options like cracking down on superannuation tax concessions and negative gearing, but has indicated it wants to use the proceeds to deliver gradual personal income tax cuts rather than to pay for hospitals and schools.
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