26 September 2024

Public service looking at negative gearing tax policy, PM suggests

| Chris Johnson
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Jim Chalmers and Katy Gallagher walking in Parliament House

Liberal Senator Jane Hume: “Who is commissioning this secret plan? Is it the Prime Minister along with Jim Chalmers and Katy Gallagher?” (pictured). Photo: Jim Chalmers Instagram.

Changes to negative gearing laws are once again back on the agenda as a distinct possibility as the Federal Government searches for answers to the worsening housing crisis across the country.

Anthony Albanese initially refused to rule it out this week, instead saying the public service was looking at “all policy ideas” the government would value.

That includes reducing housing tax concessions.

“Treasury, I’m sure, like other departments, do a range of proposals, policy ideas,” the Prime Minister said when asked if his government was looking at negative gearing.

“I want a public service that is full of ideas.

“I’m sure the public service is looking at policy ideas. That’s because we value them. But we have our housing policy. It’s out there for all to see.”

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The comments have added fuel to reports the government has commissioned Treasury modelling on changing tax benefits for the owners of investment properties.

“What our government is considering is fixing housing supply by getting our legislation through the Senate,” the PM added.

“That’s what we’re considering.”

Labor’s housing bills have stalled in the Senate, with the rejection of its Help to Buy legislation shaping up to offer the government a trigger for a double dissolution election.

However, it’s the Prime Minister’s remarks about negative gearing that have caused alarm in some quarters, even though he said in subsequent interviews that the government had no plans to tamper with the tax concessions.

They are particularly curious because Labor took a policy to the 2019 election to change negative gearing.

Labor lost that election and as recently as this month has suggested such a policy won’t be revisited.

The Opposition says winding back on tax concessions for investment properties would reduce supply and push up rents.

Shadow finance minister Jane Hume said the Coalition would likely push back against the move.

She also said the PM should be upfront about his intentions regarding the issue.

“There’s nothing wrong with the government considering anything, but lying to the Australian people about whether they’re considering it is another issue entirely,” she said.

“The question is, of course, who is commissioning this secret plan? Is it the Prime Minister along with Jim Chalmers and Katy Gallagher? Are they doing it in conjunction with the Housing Minister, Clare O’Neil? Are they letting their Cabinet know? Because this is the first that we’ve heard about it.

“The Coalition did look at this policy back in 2019 when the then Shorten-led Labor Opposition had a policy around negative gearing.

“The problem, of course, is that negative gearing, when you remove those tax incentives for investors in property, two things happen: one is investors leave the system, so that we have fewer rental properties, and those that stay in the system push their rents up so that they can compensate for the loss of that tax incentive.

“Now, at a time when we’ve got a rental crisis, that’s a real problem.”

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Senator Hume dodged questions about whether the Coalition would rule out taking a policy of its own to the next federal election to change negative gearing.

“I’m very interested to see exactly whether the government’s ruling out changes,” she said during an ABC interview.

“We will rule out anything that reduces housing supply and that pushes rents up in the middle of a housing crisis.

“I want to know what the government are proposing because, quite frankly, they should rule out changes to negative gearing.

“We rule out anything that reduces supply, we rule out anything that pushes up rents and if … the government has this secret plan to change negative gearing does that, well, then we will oppose it.”

When pressed further to specifically rule out changes to negative gearing, Senator Hume responded: “I can’t rule out a policy that I haven’t seen. This is the government’s policy … they need to come clean on what their policy is so that we can have a look at it.

“But at the moment, all we’re hearing about is a policy that is going to push up rents and that is going to limit housing supply. That’s not good policy.”

Treasurer Jim Chalmers has downplayed suggestions the government is preparing to make a move on negative gearing tax laws.

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Joe Hockey today at the National Press Club made a few points dealing with Negative gearing – https://www.youtube.com/watch?v=sIgg8MFBVeQ&t=2164s

The only negative to rental prices is Land Tax. It’s a complete rip off and inflates prices. All negative gearing does is allow investors a tax deduction off their other income. So what. They still pay tax and by investing they plan to have a decent self funded retirement. Then when it’s sold they pay capital gains and govt gets more tax. Any changes will result in less rental properties. I wonder how DHA will fare when no one wants to.invest in housing as well. Let’s see how this govt fares at the next election.

So what? You clearly don’t know how this scam works or how it has created the property bubble. By letting people deduct rental losses from wages, not just rental income, you let people rich enough to afford mulitple homes reduce their tax potentially to zero. Stir in Howard’s other gift to the rich, the CGT discount, they only pay half what they would otherwise owe when they sell the property. This is exactly how the rich get richer, because the more you earn, the less tax you pay.

devils_advocate6:22 pm 27 Sep 24

Lmao

What happens when the only people who can deduct investment property losses

Are the ones that hold other properties that are turning a profit?

Didn’t think this one through at all, did you

GrumpyGrandpa7:07 pm 29 Sep 24

This scam you talk of, isn’t quite the scam you claim.
First of all, if a landlord losses money and claims that loss on their tax, they simply reduce the level of tax they would pay, based on their marginal tax rate. Eg someone on the 30% tax bracket who loses $10,000, reduces their tax by $3,000. The other $7,000 is an actual loss. Rinse and repeat for 10 years and the landlord has a real out of pocket loss of $70,000.
If the landlord sells the property and makes a capital profit, after allowing for agents, legals etc, they are subject to CGT. CGT is levied at the the landlord’s marginal tax rate, but discounted by 50%.
The thing to remember here is that because the capital gain is brought into the one financial year, it’s possible and probably likely that the landlord will be pushed into a higher tax bracket, albeit discounted by 50%.
Our hypothetical landlord, having lost $70,000 in real money through NG, must recover this from their after-tax capital gain, otherwise they have have still lost money.

Over time, you would expect that NG losses would reduce through a reduction in debt levels (and associated interest charges) and through increased rents.

In a lot of ways , NG is no different to any business writing off it’s costs against its income.

NG is perfectly fine. If there is a problem, maybe it’s that the Costello CGT discount is too generous. With the Keating model, tax was charged at the marginal rate, but the capital value adjusted for CPIafter allowancmade for CPI

Yes, I’d call running a ‘business’ at a ‘loss’ — taxpayer expense — a scam. It’s another example of publicising losses and privatising profits. Negative gearing isn’t used by people paying 30% tax, it’s used by people being paid a lot more than that for the purpose of reducing their tax. Your $7000 loss might bring you down a tax bracket and save you more than that in tax, plus you have an appreciating asset that you only pay half the tax on when you sell.

GrumpyGrandpa7:50 pm 01 Oct 24

Some all product lines or services that a business may offer, are always profitable. A businesses administration or its HR departments don’t make a profit either. But all of these things are tax deductible and not scams.
I’m the case of a property investor, it’s really no different. Total income, less expenses incurred earning that income = taxable income.

I used the 30% tax rate as an example, simply because the maths was easy.
30% still covers income up to $120,000.

Sure, people investor in property with the intent of creating wealth. People buy shares and salary sacrifice into Super for the same reasons.
Whether it’s property, shares or super, those with higher incomes have always been better off. Not just because of the tax scales, but also because of their higher disposable incomes.
Personally, I wasn’t a fan of ScoMo’s Stage 3 tax reductions and to be frank, I think Albo should have scrapped it altogether, or applied it entirely at the lower end.
I have never been a higher income earner, but lived very frugally. I have never owned an investment property either.

There have been endless reports over decades outlining how allowing negative gearing deductions against income is dumb and inflates housing prices and rents by giving rich people an advantage in the housing market. The same reports are clear it makes little difference to supply. But sure, let’s have the spokeperson for the biggest property owner and negative-gearer in Parliament, Dutton, try to make it sound like he’s doing it all for the children.

Really? Dutton is the biggest negative gearer is he? What report did you get that from?

devils_advocate4:44 pm 26 Sep 24

Funny how people blame investors for inflating the market

Yet whenever you go to an auction it’s the owner-occupiers who “fall in love” with the place and bid up the price (including by bidding against themselves lol)

Capital Retro9:14 am 27 Sep 24

Probably in the Guardian.

A number of the Greens have investment properties, so this should be interesting

Capital Retro1:47 pm 26 Sep 24

The Greens will support abolition of negative gearing but only if existing arrangements are grandfathered.

devils_advocate12:05 pm 26 Sep 24

It will be worth getting rid of negative gearing just to see what the next scapegoat will be for whingeing renters

I’m sure they will appreciate your advocacy 🙂

It is also interesting watching chickens after the sky doesn’t fall.

devils_advocate2:05 pm 26 Sep 24

My hot tip is the whingeing renters will start blaming immigrants but happy to run a pool

Probably a fair trade off, because at least it will stop the whinging property investors complaining every time the value of this concession is questioned.

devils_advocate4:20 pm 26 Sep 24

It always speaks volumes when someone refers to the deductibility of expenses against earned income as a “concession”

Suppose it makes it easier to identify the leaners

Expenses deducted against completely separate income. Yeah, I’ll stick with calling it a concession

Always good to see the property spiv logic on display in their constant whinges when anyone questions their rent seeking.

devils_advocate1:20 am 27 Sep 24

“Everyone that earns less than me is a dole bludger.

Everyone that earns more than me is a tax dodger!”

-Low-income transfer payment recipients

devils_advocate7:21 am 27 Sep 24

Lmao

People who own investment properties are now “property spivs”

The politics of envy have risen to dizzying new heights

LOL,
How oblivious are the property spivs to write such stupidly ironic statements.

Everyone that argues against the negative economic effects of various tax concessions and incentives on property investment are:

“Leaners”
“Low income transfer recipients”
“Poor”
“Envious”

Etc. Etc.

You can’t make this stuff up.

And no, I don’t think everyone that owns an investment property is a Rent Seeking Spiv, just some of you.

devils_advocate11:32 am 27 Sep 24

Lol

Milk the government purse for Newstart, Jobseeker, child care subsidy, or “disability services” including sex workers, and everyone is fine with it

Subsidise a tenant’s rent with your PAYG income, and EVERYONE LOSES THEIR MIND

Top kek bois

devils_advocate12:01 pm 26 Sep 24

Guess they’ll consider anything BUT the one thing that will actually address the problem, I.e. increasing the supply of new homes

Lol

Capital Retro11:23 am 26 Sep 24

Every public servant I know has at least one negatively geared investment property so Albo is correct in saying that they “look at negative gearing tax policy”.
Probably every day.

Didn’t learn from Shortens massacre at the polls then. Good. 🤣

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