Prime Minister Anthony Albanese has ruled out changes to negative gearing, saying adjusting the tax deduction could harm housing supply.
Real estate investors can negatively position properties to write off losses against other income, thereby reducing their overall tax bill.
The Treasury is reportedly modelling the impact of policy changes, but Albanese took a more definitive stance on Thursday when asked whether Labor would include negative gearing reform in a Labor manifesto tax package.
“No, we don’t,” he told ABC TV.
Reforms could include, for example, limiting the number of properties that can have negative gearing, or abolishing the scheme altogether but keeping it in place. That means that the arrangements for those who already have access to it would not change.
Proponents of the reform also propose limiting rents to new construction. They argue for encouraging investment in new housing to increase the housing supply and thus reduce rents.
However, Mr Albanese said he could not see the positives in negative gearing changes. Experts warned that it would take away investment from the sector and would not help solve the supply issue, which his government is still focused on.
“The problem is that all the analysis shows that a move to negative gearing will not help supply,” he told Sky News.
Prime Minister Anthony Albanese has ruled out changes to negative gearing, saying tinkering with the tax relief could harm housing stock
The opposition appears to be ruling out any change to the negative gearing, with housing department spokesman Michael Sukkar and shadow finance minister Angus Taylor downplaying the effectiveness of the change.
Mr Sukkar said the tax on housing is already high enough and ruled out support for a limit on the number of homes covered by the concession.
According to him, the majority of people with negative gearing in property had only one investment.
“We support the current arrangements that Australian mothers and fathers rely on as a normal part of the tax system,” he told Sky News.
‘If someone can negatively impact their stock portfolio, a mother or father should not be deprived of the same opportunity by owning an investment property.’
Mr Taylor added: ‘I don’t know how increasing the tax on ordinary investors is going to increase supply.’
The opposition has also criticised Mr Albanese’s rhetoric on the issue, repeatedly using the phrase that there were “no plans” to undermine the concession.
He used the phrase again on morning television on Thursday, before delivering his more concise statement on ABC.
His choice of words has been criticised as they are the exact words he and his ministers used before breaking their pledge not to change a tax cut package.
Mr Sukkar called it ‘verbal gymnastics’.
Mr Albanese defended the proposal to change the tax package in favour of people with low to middle incomes, saying times have changed.
The Greens seized on this to argue that economic times had changed and that reforms to negative gearing and capital gains were therefore necessary.
The tax breaks drive up rents by favouring wealthy landlords, which in turn drives up the cost of housing and locks first-home buyers out of the market, said Max Chandler-Mather, Greens housing spokesman.
The debate flared up again after reports emerged that the Treasury was considering policy options for negative gearing.
Mr Albanese said he had not instructed them to do this and that it was good that the public service was being “creative”, while Finance Minister Jim Chalmers said his department “looks at all sorts of different policies from time to time”.
Real estate investors can negatively adjust properties to write off losses against other income, thereby reducing their overall tax bill.
“The Ministry of Finance does not need to be directed. They are not school children with teachers standing in front of the class telling them what to do,” Albanese said.
Opposition Leader Peter Dutton said blaming the public service “simply doesn’t meet the pub test” as these services are performing functions that they should be investigating.
He has already launched a fear campaign over the reduction in tax breaks after the Coalition criticised former Labor leader Bill Shorten for wanting to introduce the policy at the 2019 election.
The speculation has already been circulating on social media and has led to a popular coalition slogan: ‘If the Labour Party runs out of money, they will come after your money.’