Australia’s property sector has slammed what has been shown to be a massive hike in property taxes over the next ten years under changes planned by the opposition Labor Party if it wins the federal election on Saturday.
Last Friday, Labor released costings for its revenue and expense promises over the next ten years.
Whilst several media outlets have reported the amount of extra revenue raised from plans to restrict negative gearing concessions and to halve the discount which investors receive for capital gains tax at $32.5 billion over the next ten years, a tally of amounts quoted in the plan for each induvial year appears to put the actual figure at $37.3 billion.
In response, the Property Council of Australia has slammed the proposed reforms.
“While noting that current arrangements would be grandfathered, Labor’s costings show there will be a $32 billion (note the discrepancy in the figures referred to above) impact on property buyers in the future through the removal of negative gearing for established property and the halving of the capital gains discount,” Property Council chief executive officer Ken Morrison said.
“This is the wrong policy change and the wrong time. Property market conditions now are vastly different to those when Labor first announced these measures.”
As part of efforts to improve housing affordability, Labor plans to restrict negative gearing to new homes from 1 January 2020 and to halve the discount for capital gains tax afforded to investors for properties purchased after that date.
It argues that negative gearing predominately benefits wealthy investors.
Restricting negative gearing to new or newly constructed housing will help to boost supply rather than forcing first-home buyers to compete with investors for existing dwellings, it says.
The Property Council, however, disputes this.
Noting its’s own survey in which it says 33 percent investors indicated that they would purchase new housing under existing arrangements compared with 24 percent under Labor’s proposed changes, it said notions that restricting negative gearing would spur new construction were open to question.
“Our own research of investor attitudes showed that investors will be less likely to invest in newly-constructed housing under the ALP’s tax changes, not more likely,” Morrison said.
“The Property Council remains concerned that these changes will have a harmful economic impact and questions the assumption that they will be a stimulus to new housing construction.”