Housing specialist calls for negative gearing to be ‘optional’
Negative gearing and capital gains tax should be designed to be an “opt-in system” for investors, according to an RMIT expert.
An RMIT housing specialist has recommended negative reform and capital gains tax to be an optional system for investors.
A substantial debate has followed Prime Minister Anthony Albanese’s announcement that he ruled out taking negative gearing reforms to the election.
RMIT social and affordable housing expert Dr Liam Davies has called for negative gearing to only be available to investors whose properties meet national standards for fair rental contracts and construction quality.
Davies said by making the tax optional, the middle ground between differing positive and negative opinions would be met.
“The debate about negative gearing and capital gains has, so far, been largely binary. Some argue to remove negative gearing and capital gains tax, while others argue to retain it,” Davies said.
“However, there is another option: to make negative gearing and capital gains tax an opt-in system for investors whose properties meet national standards for fair rental contracts and construction quality.”
Davies noted the Commonwealth foregoes about $6 million annually in tax revenue due to negative gearing and capital gains tax discounts.
Despite this large spending, there is very poor transparency of outcomes, particularly for tenants, Davies said.
These opt-in options were outlined in a recently released report which was co-authored by Davies.
The report said: “This policy discussion paper argues that the Commonwealth is underutilising its taxation powers in relation to the welfare of rental housing tenants.”
“This is because of opaque and unaccountable tax concessions to private residential rental investor-landlords.”
According to the report, combined negative gearing, the capital gains discount and Commonwealth rent assistance compromise more than $10 billion in annual subsidy to the private rental sector.
“The negative gearing and 50 per cent capital gains tax exemption available to investor-landlords for provision of private residential rental dwellings is inefficient in terms of targeting to the most vulnerable tenants from serious transparency and accountability deficits.”
Davies said the differing opinions and debate surrounding this have “heated up” in the past few days.
“Prime Minister Albanese said he is concerned removal of these concessions would decrease housing supply. Others claim removing concessions would raise rents.”
“What Australia really needs is a supply of affordable and secure rental housing.”
“Our solution would maintain the tax advantages for investors and housing supply, while also increasing security for tenants.”
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