Thursday, 18 February 2016

Master Builders Association rather predictably bites back at Labor's negative gearing policy

 Labor's policy.....

ABC News, 13 February 2016:

Federal Opposition Leader Bill Shorten has unveiled plans to change negative gearing rules for property purchases, in a move touted to "put the great Australian dream back within reach for the middle and working class".

Key points:
* Labor government would restrict negative gearing to "newly constructed homes"
* Capital gains tax discount reduced from 50 per cent to 25 per cent
* Both measures would come into force from July 2017
* All existing investments under the scheme would be fully "grandfathered" and protected against changes

With just months to go until a federal election is called, Mr Shorten used his speech to the NSW ALP conference to rally the party faithful for the battle ahead.

He said if Labor wins the election, from July next year negative gearing would only be available on newly-constructed homes.

The changes under a Shorten government would not affect the tax arrangements for investment properties purchased before July 2017.

Under costings released from the Parliamentary Budget Office, the measures could save the budget $32.1 billion over 10 years once they come into force.

Builders' snark.....

Medianet Release 13 February 2016:

“Labor’s policy announcement on negative gearing has squarely driven a marker not only in the housing debate but also in the broader debate about tax reform and the values we hold as a community,” Wilhelm Harnisch, CEO of Master Builders Australia said.

“Master Builders Australia is committed to tackling the underlying challenges that impact on housing affordability so that home ownership and the housing rental markets remain a cornerstone of Australia’s way of life. The ALP’S new policy position will be controversial by moving away from a long held bipartisan approach since the 1990s after the failed negative gearing policy experiment,” he said. 

“The quarantining of negative gearing to newly constructed residential buildings has certain attractions for the residential building sector but has a sting in the tail by reducing the Capital Gains Tax discount from 50% to 25%,” Wilhelm Harnisch said.

“Our concern is that Labor’s policy is a populist response to those who demonise housing and negative gearing as primary cause of our fiscal and social problems. Investing in new private rental housing is not evil,” he said.

“The private rental market is a critical supplement to the public and social housing rental sectors.

The private rental market also provides a valuable role in supplementing the retirement income strategy for mum and dads on low and middle incomes. Housing is an asset class just as shares and just as shares, interest deductibility in investment housing should remain as a tax feature,” he said.

“The ALP policy leaves important questions unanswered including how to overcome structural impediments to increasing housing supply which is the only effective way to truly tackle housing affordability for both homeowners and renters ” Wilhelm Harnisch said.

“Master Builders has called for the Federal Government to work with State and Territory Governments to use federal national competition policy payments for individually targeted and permanent structural reforms that can remove the current unnecessary blockages that inflate the cost of housing,” he said.

“Master Builders will continue its positive engagement with the ALP on this important area of public policy,” Wilhelm Harnisch said.

“But what we are looking for from both major parties in the lead up to the Federal Election are policies that add to economic growth, create jobs and enhances the positive role that housing can play and that will at the same time improve the ability of mums and dads make their contribution by providing rental housing and at the same time look after their own retirement strategies,” Wilhelm Harnisch said. 

Who negatively gears investment properties.....

The Sydney Morning Herald, 15 February 2015:

Exclusive analysis of the costs and take-up of negative gearing, the 50 per cent capital gains tax discount, and superannuation tax concessions, shows the combined revenue loss - or tax expenditure - will amount to some $50 billion annually within three years, although under 7 per cent of that benefit will flow to the under 30s.
The data-crunching has been undertaken by the National Centre for Social and Economic Modelling using its own database of Australian households as well as the latest information released by the Australian Tax Office.

It was commissioned by the progressive think tank, The Australia Institute.
Executive Director Ben Oquist said the findings showed conclusively that keeping the current concession regime in place is neither in the national interest nor fair.

"In total, these concessions are worth more than $37 billion, yet the young receive only $2.4 billion of their value," he said.

"The capital gains tax discount and negative gearing are particularly unfair for the young, with the under 30s taking approximately 1 per cent of the benefit of tax breaks worth $7.7 billion a year and climbing.

The NATSEM research also shows that 73 per cent of the benefits of the capital gains tax discount, flows to the top 10 per cent of income earners.
All up, it says the under 30s share of the three concessions combined is just 6.4 per cent, whereas those over 50 years of age receive 53 per cent of the benefits. That works out to $2.4 billion versus $19 billion for those over 50 - many of whom are already well-off......

ABC The Drum, 24 September 2014:

When I crunched the numbers, over 60,000 people with investment properties whose taxable income was $80,000 or less had total incomes above that $80,000 threshold ...

The very reason that many housing investors fall below the $80,000 threshold is because they have used negative gearing to slash their tax bill...

Graphs found at  

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