As treasurer Jim Chalmers prepares to hand down next Tuesday's federal Budget, Skip's Mario Emmanuel thinks Australia is having precisely the wrong argument
The co-founder and chief executive of high-growth, low-deposit mortgage lender Skip is not opposed to housing reform. He is opposed, however, to reform that treats the symptoms while ignoring the illness entirely.
While the Budget debate has fixated on capital gains tax (CGT) discounts and negative gearing – reforms that MPA has reported are now all but locked in – Mario Emmanuel (pictured) argues the conversation is missing the single largest cost most Australian households carry: income tax.
"For most Australian home buyers, income tax is their biggest expense," he says. "It’s taken before any money hits our bank accounts – which somehow makes it feel like it was never ours.”
The data from Skip's own lending book gives weight to his argument. To purchase the median-priced property in Australia's major cities, Emmanuel says seven in ten of Skip's customers need a combined household income exceeding $200,000. These are not wealthy households but the country’s “hardworking backbone; healthcare workers, engineers, teachers, carers, tradespeople and business executives."
Yet as a household, they surrender $46,000, to $60,000 to the government every year. "By the time they pay 33 cents of every pre-tax dollar on rent, at most they are left with just 37-46 cents to cover groceries, health insurance, utilities and saving for a deposit," says Emmanuel.
He worries that the structural mismatch has worsened over time. National rents have risen roughly 40% in the five years to September last year, while wages grew by around 17% in the same period. Inflation, meanwhile, has quietly dragged more households into higher tax brackets – a process known as bracket creep – increasing the effective tax burden without any legislative vote.
“All the while we’re gaslit into believing it’s the CGT exemption that is stopping families from getting on the housing ladder,” says Emmanuel.
Emmanuel reserves particular sharpness for the federal government's fiscal management. He points to the Albanese government presiding over what he describes as the largest government expenses in Australian history – growing the budget at roughly 16% annually over the past two years – while simultaneously benefiting from historically high tax receipts.
A fix hiding in plain sight
Emmanuel has a proposal: allow Australian families to be taxed jointly, as couples rather than individuals. It is, he notes, neither a radical idea nor a new one. The US has operated a joint filing system for decades. Cross-party figures and unlikely bedfellows independent MP Allegra Spender, Senator Matt Canavan and Senator Pauline Hanson have separately flagged similar thinking. Yet the major parties have shown little appetite to engage.
Under Australia's current individual system, a household where one partner earns $200,000 and the other earns nothing pays dramatically more income tax than a household where the same $200,000 is split evenly between two earners. The difference, Emmanuel calculates, can run to $20,000 or more per year in take-home pay.
“Families with the same gross income shouldn’t face a $20,000 swing in take-home pay based on how income is split between a couple. Families should be taxed consistently based on how much income they earn, as a family.”
The second-order effects, Emmanuel argues, are just as significant. A joint taxation model “will have an in-built release valve, as people know that their effective tax rate will be lowered if they choose to take time off to have children”.
What the Budget won't fix
As MPA has reported, next Tuesday's budget is set to deliver the most significant overhaul of investment property tax in Australia since the Howard government introduced the 50% CGT discount in 1999. Negative gearing restrictions for future acquisitions, a reduced CGT discount – likely from 50% to around 33% – and tighter rules for discretionary trusts are all expected to be confirmed.
Emmanuel does not dismiss the debate around investor taxation entirely. But he believes that framing housing affordability as a contest between investors and first-home buyers is both intellectually lazy and practically counterproductive.
“We must not allow political spin to get in the way of serious economic reform,” says Emmanuel. “Australians are focused on what they can do to realise homeownership for their families, not jealously fixated on the success or good fortune of their neighbours.”
