Tax discount ‘skewing’ property market to investors
Capital gains tax cuts have been seen as tilting the housing market in favor of investors to the detriment of property owners, as the federal government has been called to repeal the controversial measure.
The parliamentary inquiry report into capital gains relief, published on Tuesday, found the benefits of tax cuts were unevenly distributed and distorted the availability of housing stock across Australia.
This measure, introduced by the Howard government in 1999, allows for a 50 per cent reduction in tax on investment properties sold after having been owned for one year.
Labor has been called on to make changes to the tax cut to improve intergenerational fairness and ordered to reduce its percentage in May’s federal budget.
“There is evidence that the privileges provided by capital gains tax relief skew home ownership away from homeowners towards investors, with negative effects,” the report said.
“The benefits of capital gains tax relief are also unequally distributed, leading to income and wealth inequality and intergenerational inequality.”
The inquiry was chaired by Greens senator Nick McKim, who proposed removing the tax break entirely for investment properties.
He said the report was a historic opportunity to deliver meaningful change for young Australians looking to enter the housing market.
“The only limit is Labour’s ambition and courage,” he said.
“The combination of negative gearing and capital gains tax relief has led to excessive property speculation and inflated house prices over the last 26 years.”
Rather than placing heavy emphasis on tax relief, the Greens have suggested phasing it out as part of reforms.
Finance Minister Jim Chalmers said before the report was published that some of the findings from political parties would be predictable.
“There is no doubt that the committee has reached a number of findings. We will consider these as part of our wider work as always,” he told reporters in Canberra.
“We try to communicate with these committees as respectfully as we can. But these decisions are ultimately made by the cabinet, not the parliamentary committees.”
In an opposition report, the coalition said the issue most affecting entry into the property market was supply and that the tax break was working as intended.
Liberal senator Andrew Bragg said: “Removing the capital gains tax credit would discourage new construction, weaken supply and therefore raise house prices. It’s simple economics.”
“The real agenda appears to be trying to replace mom-and-pop investors with corporate landlords who are frankly not Australian.”
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