Key Takeaways
- The Australian Manufacturing Workers’ Union (AMWU) is calling for the capital gains discount to be phased out for investment properties and negative gearing to be effectively abolished.
- The union suggests replacing the federal government’s 5% home deposit scheme with one that allows renters to allocate a portion of their rent to buy a property.
- The AMWU argues that the current housing tax breaks have "commodified" property and worsened inequality.
- The Australian Nursing and Midwifery Federation and the Grattan Institute thinktank also recommend winding up the capital gains tax discount.
- The federal government has repeatedly rebuffed calls to change the housing tax breaks, arguing that policies to increase supply are the best way to tackle the housing crisis.
Introduction to the Issue
The Australian Manufacturing Workers’ Union (AMWU) has called for significant changes to the housing tax breaks in Australia, warning that they have "commodified" property and worsened inequality. The union argues that the current system has allowed property developers, real estate agents, and investors to profit from denying working people the dignity of home ownership. The AMWU’s proposal includes phasing out the capital gains discount for investment properties and effectively abolishing negative gearing. This move is part of a broader push by several stakeholders, including the Australian Nursing and Midwifery Federation, to overhaul the housing tax breaks in submissions to a Greens-led Senate inquiry.
The Current State of Housing Tax Breaks
The current housing tax breaks, including the 50% capital gains tax discount and negative gearing, have been in place for many years. The discount applies when a property is sold after at least 12 months of ownership and is expected to cost the federal budget $21.8 billion in forgone revenue in 2025-26. The AMWU argues that this concession has exacerbated inequality and allowed property investors to accumulate and hoard wealth. The union’s proposal to phase out the discount and end negative gearing is aimed at addressing these issues and making housing more affordable for working people.
Proposed Changes to Housing Tax Breaks
The AMWU’s proposal includes several key changes to the housing tax breaks. Firstly, the union recommends reducing the capital gains discount on investment properties immediately and phasing it out entirely over a two-year period. Secondly, the union wants to stop investors from using losses to lower their income tax bill, effectively ending the negative gearing of properties. The revenue recouped from winding up these concessions should be redirected to developing Australia’s modular housing industry, according to the AMWU. The union’s position goes further than the Australian Council of Trade Unions (ACTU) proposal, which called for negative gearing and the capital gains tax breaks to be restricted to a single investment property and grandfathered for five years.
Responses to the Proposed Changes
The proposed changes to the housing tax breaks have been met with a range of responses from different stakeholders. The Grattan Institute thinktank recommends a 25% concession, which would be phased in over five years, raising roughly $6.5 billion a year. The Centre for Independent Studies, a conservative thinktank, argues that the 50% discount is "simple and well understood" and that there is no strong reason for changing it. The federal government has repeatedly rebuffed calls to change the housing tax breaks, arguing that policies to increase supply are the best way to tackle the housing crisis.
Implications of the Proposed Changes
The proposed changes to the housing tax breaks have significant implications for the housing market and the broader economy. The AMWU argues that the current system has allowed property developers, real estate agents, and investors to profit from denying working people the dignity of home ownership. The union’s proposal aims to address these issues and make housing more affordable for working people. However, the changes may also have unintended consequences, such as reducing investment in the housing market or increasing rents. The Senate inquiry, which is due to report on March 17, will provide an opportunity for stakeholders to consider these implications and develop a more comprehensive approach to addressing the housing crisis.
Conclusion
The debate over the housing tax breaks in Australia is complex and contentious. The AMWU’s proposal to phase out the capital gains discount and end negative gearing is part of a broader push to overhaul the current system. While there are valid arguments on both sides, it is clear that the current system has contributed to inequality and made housing less affordable for working people. The Senate inquiry provides an opportunity for stakeholders to develop a more comprehensive approach to addressing the housing crisis, one that balances the needs of different groups and promotes a more equitable and sustainable housing market. Ultimately, the goal should be to create a housing system that provides dignity and security for all Australians, rather than one that prioritizes the interests of investors and property developers.