“No, we’re not.” That’s how Prime Minister Anthony Albanese responded to a query on Thursday morning about whether or not Labor is contemplating taking adverse gearing reform and capital beneficial properties tax reform to the subsequent election.
It stays to be seen if that assertion will put an finish to the hypothesis that’s been rampant this week, following a report in The Sydney Morning Herald that mentioned Treasury was a doable tweak to the tax breaks.
Albanese mentioned within the interview with ABC Information Breakfast that there was “nothing uncommon” about Treasury bureaucrats adverse gearing — in keeping with the prime minister, it’s merely a great instance of a “dynamic and inventive” public service that “appears at concepts”.
Labor has a protracted and messy historical past with adverse gearing and capital beneficial properties tax reform. In 1985, the Hawke authorities abolished adverse gearing for all future rental property buyers, “[quarantining] any losses comprised of proudly owning rental properties” in order that the losses “couldn’t be used to cut back tax on different sources of assessable earnings”, within the phrases of Jim O’Donnell, a solicitor who printed a paper on the coverage in 2005.
The Hawke authorities reversed the adjustments in 1987, regardless of the then treasurer Paul Keating suggesting in an August 1987 cupboard submission that “with the notable exception of Sydney, situations within the residential rental property market [had not become] unusually tight”, as ABC Information reported in a fact-check piece in 2015.
“There was such a pile-on that they needed to put it again,” monetary journalist Alan Kohler advised Crikey.
Kohler described the pile-on as a quintessential scare marketing campaign: “The explanation they needed to put it again was as a result of the property trade declared this was going to guide to an entire absence of buyers, and subsequently cut back the availability of rental housing. Labor type of caved in on the finish.”
Whether or not the trade’s professed worry is based or not is tough to say, in keeping with Kohler.
“The difficulty is that adverse gearing applies to all the things in the mean time, and it doesn’t distinguish between current housing and new housing,” he mentioned.
“All of the modeling means that eradicating it could have solely a really minor impression on home costs, mathematically talking. My view is that it’s not concerning the precise impression — it’s concerning the view of housing as an funding, as a market slightly than a human proper and a spot to stay.”
When adverse gearing was first launched, in 1936, “it was thought it could encourage funding in housing and enhance provide,” Western Sydney College affiliate professor Michelle Cull wrote in a bit for The Dialog earlier this yr.
Whereas buyers definitely just like the tax break, there’s little proof its absence would imply a disaster for renters. Because the ABC reported in its 2015 fact-check, the experiment in abolishing adverse gearing within the mid-Eighties didn’t result in hiked rents throughout the nation.
“Throughout the interval that adverse gearing was abolished actual rents notably elevated solely in Sydney and Perth — the place rental vacancies had been at extraordinarily low ranges,” the story mentioned. “That is inconsistent with arguments that adverse gearing was a big issue, with adverse gearing prone to have a uniform impression on rents in all capital cities … whereas the lease will increase in two cities did coincide with the momentary elimination of adverse gearing tax deductions, it’s unlikely that change had a considerable impression on rents in any main capital metropolis in Australia.”
Extra just lately, Labor took adverse gearing and capital beneficial properties tax reform to the 2016 and 2019 elections, and misplaced each instances.
“The concept was to restrict adverse gearing to new homes solely, in order that it could discourage funding in current housing and solely encourage investing in new housing,” Kohler mentioned. “In 2016, Labor gained a number of floor and nearly gained. They had been then devastated by the 2019 loss. Nevertheless it’s questionable whether or not the explanation they misplaced was adverse gearing, as a result of additionally they added an assault on dividend franking. None of us will ever know.”
If Labor MPs worry a brand new try at reforming adverse gearing would result in one other scare marketing campaign, they’re undoubtedly right.
One unnamed Coalition MP, chatting with the ABC’s David Speers, mentioned the opposition would go after Labor even when any proposed adjustments would goal rich buyers solely.
“No matter they do, we’ll run a scare marketing campaign saying they’re after you subsequent,” the particular person mentioned, including Labor can be “fucking nuts” to attempt it once more.
Want extra proof? Have a look at right this moment’s Day by day Telegraph, which contained a headline declaring: “It’s Labor’s tax on ambition”. The paper additionally featured an opinion piece by Actual Property Institute of Australia president Leanne Pilkington (which seems to have been taken down) arguing that “concentrating on adverse gearing could have dire penalties for each buyers and renters”.
The web headline for that opinion piece was definitely scary: “Hundreds of thousands crucified by Albo’s new housing transfer”.
Ought to Labor take a plan to reform adverse gearing to the subsequent election? Tell us your ideas by writing to letters@crikey.com.au. Please embrace your full identify to be thought-about for publication. We reserve the appropriate to edit for size and readability.
