‘Another broken promise’: Concerns Anthony Albanese is planning to go after negative gearing
There are growing concerns Anthony Albanese is preparing to break another promise which the property industry says will only hurt renters.
In the wake of the prime minister’s backtracking on support for the stage three tax cuts, which he pledged to keep during the last election but last month overhauled, attention has now turned to a multibillion-dollar elephant in the room.
Negative gearing, which allows property investors to offset their tax by claiming losses incurred by owning and maintaining rental dwellings, isn’t cheap.
Analysis produced by the Parliamentary Budget Office in late 2022 estimated negative gearing drains about $12.7 billion from budget revenue.
Late last month, a Treasury report on tax expenditure revealed deductions for “maintaining and financing property interests” in 2023-24 is expected to total $27.1 billion – up $10 billion on 2020-21.
Those opposed to negative gearing say it locks out first-home buyers by making it hard to compete with investors, while supporters say it encourages new landlords into the market and supports the supply of rental dwellings.
Private landlords provide the overwhelming lion’s share of homes that are leased by more than a third of Australians.
Mr Albanese has dodged several opportunities in the past week to staunchly rule out any changes to negative gearing. Instead, he has insisted he has “no plans” – something he also said about stage three until recently.
Some in real estate circles are concerned Mr Albanese could justify scaling back or scrapping negative gearing by using a similar argument.
“Given the prime minister already has one broken promise under his belt this year, it would appear to be politically unwise to the do the same with negative gearing,” Property Investment Professionals of Australia chair Nicola McDougall said.
The opposition’s treasury spokesman Angus Taylor said Mr Albanese’s “decision to lie” about stage three tax cuts means he can’t be trusted.
“The consequence of the broken promise means that Australians are left wondering what is next,” Mr Taylor told news.com.au.
“The Prime Minister and Treasurer have been given numerous opportunities in Question Time and interviews to rule out any changes to negative gearing. Instead, they’re using the same weasel words they used just before breaking their promise on stage three tax cuts.”
Huge harms or big benefits?
Last year, when the issue of negative gearing resurfaced after noise from some crossbench and backbench Labor MPs, the Property Council of Australia was quick to issue a dire warning.
The lobby group’s chief executive Mike Zorbas said modelling had indicated there would be a hefty price to pay for ending the generous concession.
Scaling back or scrapping negative gearing would “knock housing construction down another 4.1 per cent, reduce GDP by $1.5 billion, and end 7000 jobs”, Mr Zorbas said, quoting analysis by Deloitte in 2019.
“With rising capital costs and labour challenges, the impacts would be worse if modelled now,” he said.
“Imagine making that change while you’ve promised one million new homes by 2029 and successive state government decisions, including harmful foreign investor surcharges, will continue to diminish apartment supply.
“For the disruption it would cause you might change house prices by one to four per cent in a healthy market, one with high rental vacancy, buoyant new supply and modest immigration.
“That is not the market we are looking at and those price changes will be swept away in months.”
Ms McDougall said research conducted by her group, which represents those working in the property investment industry, showed landlords are already fed up.
“According to [our] Annual Investor Sentiment Survey, the number one reason why nearly 13 per cent of investors sold at least one property over the previous year was governments increasing or threatening to increase taxes, duties, and levies that make property a less attractive asset to hold,” she said.
“At a time when tenants can least afford it, the people providing the vast majority of rental homes are selling up in droves, predominantly because of government intervention, such as this latest attack on negative gearing.”
An estimated 2.24 million Australians own an investment property, accounting for about 3.25 million dwellings.
The vast majority of landlords – that is, 71 per cent – own a single investment. Another 18 per cent own two properties while five per cent own three.
Of those who are investors, the latest available data shows a little more than half negatively gear their assets.
“Most only benefit from negative gearing for a relatively short period of time before their property becomes positively geared, which means they will pay tax on that income, as well as CGT when they sell at some point in the future,” Ms McDougall said.