Chang­ing CGT won’t fix hous­ing’s woes

Australasian Timber - - HOUSING -

CHANG­ING CAP­I­TAL Gains Tax (CGT) isn’t the an­swer to ad­dress hous­ing af­ford­abil­ity and sup­ply prob­lems, ac­cord­ing to the Hous­ing In­dus­try As­so­ci­a­tion (HIA).

“Im­prov­ing hous­ing af­ford­abil­ity and home own­er­ship rates needs to be a fo­cus of all par­ties in the up­com­ing fed­eral elec­tion,” says HIA Chief Ex­ec­u­tive In­dus­try Pol­icy and Me­dia, Gra­ham Wolfe.

“The an­nounce­ment by the Op­po­si­tion that it in­tends to halve the cap­i­tal gains dis­count on in­vest­ment prop­er­ties will, in our view, not achieve these ob­jec­tives.

“Re­duc­ing the CGT dis­count, which is an im­por­tant mea­sure to recog­nise the net present value of an as­set, will push in­vest­ment away from Aus­tralia’s hous­ing sec­tor.

“The Henry Tax re­view rightly con­cluded that ad­dress­ing the sup­ply side im­ped­i­ments to new hous­ing had to be the pri­or­ity fo­cus, in­clud­ing: re­duc­ing stamp duty; al­le­vi­at­ing land sup­ply re­stric­tions; ad­dress­ing oner­ous plan­ning con­trols; and de­liv­er­ing hous­ing in­fra­struc­ture in an eq­ui­table and timely man­ner,” said Mr Wolfe

“Re­search con­ducted by In­de­pen­dent Eco­nomics on be­half of the HIA – us­ing a model also ap­plied by the Com­mon­wealth Trea­sury - con­firmed that re­strict­ing ac­cess to neg­a­tive gear­ing for res­i­den­tial prop­erty would re­duce in­vest­ment in hous­ing, erode hous­ing af­ford­abil­ity and put up­ward pres­sure on rents,” he said.

“The pri­or­ity for tax re­form of hous­ing must be to re­duce the tax bur­den on new home buy­ers. The level of tax­a­tion on a new house and land pack­age can be up to 44% of the fi­nal price, which far out­weighs the pos­i­tive ben­e­fits to in­vest­ment in new hous­ing to sup­port the rental mar­ket, of the cur­rent CGT or neg­a­tive gear­ing regimes.

“Now is a piv­otal time for in­vest­ment in new hous­ing, which has im­pli­ca­tions for af­ford­abil­ity and the broader econ­omy, with starts ex­pected to de­cline over the year ahead. Any changes to tax­a­tion with re­spect to hous­ing must be aimed at boost­ing hous­ing sup­ply, and re­duc­ing the over­all tax bur­den on the sec­tor,” said Mr Wolfe.

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