Positive plan to help housing affordability

 

A Shorten Labor Government will improve housing affordability and support housing construction by reforming negative gearing and capital gains tax arrangements. All investments made prior to 1 January 2020 will be fully grandfathered.

Australia currently has the most generous property tax concessions in the world.

Generous property tax concessions mean that first home buyers are being locked out of the housing market, having to compete with investors looking for their fifth, sixth and seventh homes. Under the Liberals, the cohort of investors with five investment properties is growing at six times the rate of those with one property.

Current arrangements for negative gearing and capital gains tax concessions predominantly benefit high-income earners. 70 per cent of the benefits of the CGT discount and 50 per cent of the benefits of negative gearing go to the top 10 per cent of income earners

The Abbott-Turnbull-Morrison Government spends well over $11 billion a year on negative gearing and capital gains tax concessions: money that could be better spent on Australia’s schools and hospitals.

Independent economists like Saul Eslake, and international economic agencies like the International Monetary Fund have called for reforms to Australia’s overly generous property tax concessions because they encourage excessive leverage in real estate.

LABOR’S PLAN

Labor has a comprehensive plan to improve housing affordability and support housing construction. A Shorten Labor Government will:

  • Limit negative gearing to new housing from 1 January 2020. All investments made prior to this date will not be affected by the changes and will be fully grandfathered.
  • Halve the capital gains tax discount for all assets purchased after 1 January 2020. This will reduce the capital gains tax discount from assets held longer than 12 months from 50 per cent to 25 per cent. All investments made prior to the 1 January 2020 will be fully grandfathered.
  • Put negative gearing to work by limiting it to new investment properties to help boost housing supply and jobs.

The grandfathering element of our policy applies to property and assets purchased prior to the start date of our policy. This means, for example, that if you own a property prior to 1 January 2020, you are able to negatively gear it after that date. The changes to the CGT discount will not apply to superannuation funds or to the 50 per cent active asset reduction concession that applies to small businesses.

This policy will help support housing construction, complementing our 10‐year plan to support the construction of 250,000 new affordable homes. We’ll also encourage more Build to Rent housing construction so more renters can access stable long-term tenancies and more housing in desired locations close to public transport and close to employment opportunities.

Labor first announced our plans to reform negative gearing and the capital gains tax discount in 2016. Our reforms are good for the budget and good for home ownership as they will help put first home buyers back on a level playing field with investors.