Greens float revised policy for negative gearing, CGT

On Thursday, the Greens issued a policy proposal to improve the housing crisis, calling for property tax breaks, including negative gearing and CGT discounts, to be phased out and limited to one investment property only for existing investors.

Under the Greens’ policy, negative gearing and the 50 per cent CGT discount would be phased out, and limited to one investment property for existing investors.

“The Greens will make reforming negative gearing and the capital gains tax discount a priority in the next Parliament, including when there’s a minority government,” Adam Bandt, leader of the Greens, said.

“This reform has always been urgent, but the threat of a Trump-fuelled attack on Australian renters and first home buyers in the next few months now makes this a matter of housing life and death.

“Investors with big money behind them could jump into the housing market because of these incentives and lower interest rates, while first homebuyers with their life savings would be priced out of the already overheated market.”

Independent analysis cited by the Greens found changes to negative gearing and the CGT discount would allow more than 850,000 people to live in a home they own.

The Greens also said their policy would shield mum-and-dad investors from the change, as the existing tax settings would remain for one investment property per investor.

“This single change would see more than 850,000 renters become home owners, raise enough money to build over 600,000 new public homes, and still leave people with one investment property,” Max Chandler-Mather, Greens housing spokesperson, said.

Independent policy think tank the Grattan Institute found that amendments to negative gearing and CGT tax discounts would not significantly impact housing prices but could help repair the budget bottom line.

“We [the Grattan Institute] think their impact on the housing market has at times been overblown,” Matthew Bowes, associate for the Grattan Institute's housing and economic security program, said regarding negative gearing and the CGT discount.

“The total value of Australia’s housing stock is currently more than $11 trillion. And rolling back these tax concessions in the way we recommend would raise about $11 billion in revenue. So, it’s just a very small drop in a very large ocean,” Bowes said.

The Grattan Institute estimated that rolling back the tax incentives would cause house prices to fall by about 1 per cent, while decreased investment in new housing could raise rents by around $1 per week.

While scrapping the tax incentives would have a minimal impact on house prices, it would shift the balance towards home buyers and could increase home ownership rates by a couple of percentage points, Bowes said.

Furthermore, the $11 billion in government revenue spent on investment property tax discounts could be put to a more productive use.

“While $11 billion sounds like a very small amount in the context of the housing market, it’s a lot of tax revenue in the context of the budget that we’re foregoing without a strong rationale for it,” Bowes said.

The Institute of Financial Professionals Australia (IFPA) spoke out against the Greens’ policy proposal.

“There is nothing wrong with wanting to help renters transition to home ownership, but given that existing owners of multiple properties would have based their investment decisions on the existing rules, what the Greens are proposing would amount to a retrospective and damaging change in the tax settings,” the institute in a statement.

“The housing landscape in Australia has changed a lot since 2019, and this set of policies may represent an ambitious claim which the Greens will negotiate on with Labor after 3 May, should they be in a balance of power position.”