Changing CGT won’t fix housing’s woes
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.