Labor promises ‘most ambitious’ Budget to date, with property investors in the firing line
Nicola Powell (pictured), chief of research and economics at Domain, reckons Albanese has dropped "very strong hints" that changes to the capital gains tax (CGT) discount and negative gearing regime are on the way.
Speculation is rife ahead of the May Budget that Albanese and treasurer Jim Chalmers intend to pare back these two precious tools of the Australian property investor class in a bid to restore fairness to the market.
While Labor has not verbally committed to reducing the CGT discount or negative gearing benefits, the party’s consistent messaging around restoring intergenerational equality and productivity has caused stakeholders to read between the lines.
Speaking to The Chamber of Minerals and Energy of Western Australia on Wednesday, Albanese spoke of “building our resilience” by “protecting ourselves from the economic division and social dislocation we have seen take hold in other parts of the world, where people feel like the system is broken beyond all repair”.
Resilience, said Albanese, “will be a key focus of the Budget we deliver in 13 days’ time. It will be our Government’s most important Budget to date – and our most ambitious. The challenges confronting our nation right now demand that ambition – and so too do the opportunities ahead of us”.
Read more: Canberra wants to meddle with the world’s most property-obsessed market
If the soothsayers are right and tax policy changes are confirmed, Powell warned that it could have negative consequences. "There are some investors already selling off investment properties to create that buffer... pre-empting what could come out of the Budget,” she told MPA. "If we do see sweeping change, it will impact investment activity, will deter investors (and) that will make it more expensive to rent."
Her viewpoint reflects those of industry bodies including the Finance Brokers Association of Australia (FBAA), the Property Investment Professionals of Australia (PIPA) and the Housing Industry Association (HIA).
However, the devil will very much be in the detail.
Powell reckons a targeted approach – such as limiting changes to new developments only – could actually work in the market's favour by stimulating supply pipelines, which remain one of the most pressing structural issues in Australian housing.
Additionally, grandfathering existing investors would soften the blow considerably.
"I'd be surprised if we don't see some element of grandfathering,” said Powell. "When people have made investment decisions based upon current policy... there is something that's not fair around changing that when somebody had made an investment strategy based upon taxation and policy at that time."
A partisan headache for Albanese
Any proposed changes to CGT and negative gearing will get little support from the opposition, with Coalition leader Angus Taylor saying it’s “hard to see how we could support an extra tax on housing when we need more houses in the country”.
Taylor told Nine’s Today program: “We’ve got a younger generation of Australians who are giving up on the hope of owning a home, raising a family in their home, and that is moving away from the Australia I firmly believe in, that means we need more houses built. Putting in extra tax on houses is not the way to get more houses built.”
Shadow treasurer Tim Wilson went even further, taking to Sky News to accuse Albanese of trying to start an “intergenerational war”.
"Anthony Albanese is pouring fire onto the idea of intergenerational conflict because he thinks it's the best way for him to get ahead. The reality is it's the worst way for young Australians to get ahead," Wilson said.
But Powell acknowledged that “everything needs to be on the cards” to address the gap “between those that own a home and those that don't”.
One option, she said, is to reassess the treatment of property in the age pension test.
"It's very hard in today's environment to argue that somebody sitting in a $1.5 million home should also be getting the age pension. In an intergenerational framework that we've got today, it's very hard to justify that,” said Powell. She believes addressing this issue would encourage more pensioners to downsize, thus freeing up existing housing stock. 65% of outright-owned homes have two or more spare bedrooms, noted Powell.
With the Coalition unlikely to support any changes to CGT and negative gearing that adversely affect property owners, Labor needs to court The Greens to get legislation passed through the Senate. That is unlikely to be an issue, as The Greens robustly support measures to crack down on wealth taxes.
Environmental planning shakeup
Albanese also unveiled a $45 million, four-year spending blitz to speed up new housing and energy projects. The funds will be used to streamline existing environmental planning approvals across all states and territories.
"If a state government signs one of our new bilateral approval agreements, they will be empowered to conduct assessments and approvals on the Commonwealth's behalf,” said Albanese. “So instead of a two-stage, two-track process, with that all the cost of delays and doubling up that occurs, this will be a one-step process, with one, clearer, faster, yes or no.”
The May Budget is due to be delivered on Tuesday, 12 May.
