“This will give the government something big and positive to talk about,it will be a major talking point in the campaign.”
Albanese was asked several times last week whether Labor would consider changes to negative gearing,but hedid not rule out any options.
“I don’t answer those sorts of questions,” he said on ABC Radio National on Thursday. Two days earlier,on ABC Radio Sydney,he cited a claim from the Property Council of Australia that changing negative gearing wouldhurt housing supply.
“So that is one of the reasons why we’re very cautious about that,” he said.
Asked again on Wednesday morning in Launceston,after this story was initially published,Albanese did not rule out any changes to negative gearing or dispute that modelling work was happening.
“We value the public service,so from time to time I’m sure the public service are looking at policy ideas,” he said.
“That’s because we value them,but we have our housing policy,it’s out there for all to see.”
Albanese changed the subject to government housing measures including the Build to Rent scheme to invest in new homes and the Help to Buy policy to help homebuyers own their first homes,both of which have been blocked in the Senate.
Asked further questions,Albanese did not confirm whether he had asked officials to look at negative gearing. Greens leader Adam Bandt said this masthead’s reporting showed Labor believed negative gearing changes were possible.“They must commit to doing it,” Bandt said on social media.
The options modelled by Treasury would give Labor a “middle path” to the election by advocating careful changes,such as a cap on the number of properties a taxpayer could negatively gear,rather than the more radical changes sought by the Greens or the status quo backed by the Coalition. The changes would be grandfathered and not affect anyone currently negatively geared.
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A spokesperson for Treasurer Jim Chalmers said:“Our housing policy is clear. It doesn’t include that change.” The spokesperson did not comment on whether modelling work had begun.
“We have a broad and ambitious housing agenda and we could be building more homes if it wasn’t for the divisive politics of the Greens and Coalition.”
The Labor official said Treasury was looking at different proposals to the ones former leaderBill Shorten took to the 2016 and 2019 elections,which would have limited the use of negative gearing to new properties only,and reduced the capital gains tax concession from 50 per cent to 25 per cent.
Several sources in the government,speaking on the condition they were not named,said they had not been part of any conversations about changes to negative gearing. The considerations appear to have been limited to officials reporting to the prime minister,treasurer and Finance Minister Katy Gallagher.
A refresher on negative gearing and the capital gains discount
Negative gearing:when an investor purchases a property with a loan,and the rent they get from it is less than the costs (including interest,rates and maintenance) of owning it. When this happens,the investor can subtract the net loss from their other income,reducing their taxable income.
Capital gains tax discount:capital gains on assets (this can include things like shares,as well as housing) are taxed like other forms of income when you sell them,but with a 50 per cent discount if they’ve been held for at least 12 months.
The Coalitioncanvassed a cap onnegative gearing in 2016 when Malcolm Turnbull was prime minister and Scott Morrison was treasurer,but Morrison later argued strongly against the idea.
The Grattan Institute estimates that about 66 per cent of Australians aged 30 to 34 owned their own home in 1981,but that this fell to 49 per cent in 2021.
The institute said in May the government should halve the capital gains tax discount and curb negative gearing so rental losses could no longer be offset against wage and salary income. It said this would raise about $7 billion in tax revenue every year,but cautioned this move alone would make little difference to housing prices.
Separate work by NSW Treasury economist Michael Walters estimated that changing negative gearing could increase the owner-occupied share of the housing market by 4.7 per cent.
Labor figures are divided on the political risk of changing the tax,with some saying the negative gearing policy did not cost them votes in 2016 or 2019,while others fear a backlash by forcing some people to pay more tax – a key difference with the stage 3 reforms.
If Labor chose to proceed with changes to negative gearing,it would take the proposal to the next election so it could not be accused of breaking a promise.
Dutton has signalled he is considering allowing young people toaccess their superannuation to buy their first home,while the Greens have been demanding the government impose a national rent freeze,provide more money for social housing and phase out negative gearing over five years.
According to the Australian Tax Office,about 2.2 million people were landlords in Australia in 2021 and about half of them made a loss on that investment,which meant they were negatively geared. Another half made a profit on their investment,which meant they were positively geared.
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Of the 2.2 million people with an investment property,1.6 million had one,423,000 had two and 130,000 people had three investment properties,with about 85,000 owning more than this.
Negative gearing allows taxpayers to claim deductions on their income tax for the expenses involved in owning an investment property,giving them a way to save on tax while the property could gain in value. They also benefit from a concession on the capital gains tax they would owe upon selling the property.
Treasury said in February thatrental property deductions cost the budget $24 billion last financial year,but negative gearing was only a portion of this.
About 1.1 million people had a rental loss,which is the definition of negative gearing. These losses added up to $7.8 billion and provided a tax benefit of $2.7 billion to those taxpayers in the year to June 2023.