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Date
2024-10-12
Australian Treasurer Confirms No Changes to Negative Gearing: Reforms Won't Boost Housing Supply
Australian Treasurer Jim Chalmers has rejected plans to abolish tax concessions for property investors, stating that such a change would not be sufficient to increase the supply in Australia's housing market. Amid ongoing controversy surrounding negative gearing and capital gains tax reforms that have persisted for weeks, Chalmers' remarks have also dispelled speculation about a policy shift before the election.
In an interview with the Australian Broadcasting Corporation in Washington, Chalmers said, "I believe the main challenge at the moment is supply, on which we have been clear in various ways," "One of the reasons we are not planning to change the current negative gearing policy, to abolish negative gearing or capital gains tax discounts, is that we do not believe these measures would have a positive impact on housing supply."
"The current number of houses is not enough to meet the needs of Australians. Housing supply is far from what we expected."
Regarding who commissioned the Treasury to model negative gearing and capital gains tax, Chalmers and Prime Minister Anthony Albanese have been vague in their public statements over the past few weeks. As the news of Albanese's purchase of a cliff-top residence for 4.3 million Australian dollars came to light, discussions on negative gearing reform have become more complex. However, the Australian Financial Review stated that the latest remarks are the clearest signal to date that the Labor Party will not touch this politically sensitive issue before the May election next year.
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In the federal elections of 2016 and 2019, the Labor Party proposed to limit negative gearing to new housing, while exempting all existing negative gearing properties, and advocated for halving the capital gains tax discount for investors holding assets for more than 12 months, while exempting existing investments, but both attempts were unsuccessful.
The negative gearing policy allows investors to deduct expenses (such as loan interest, property fees, and maintenance costs) when they exceed rental income.Data from the Treasury shows that in 2023, approximately 1.1 million people claimed rental losses and consequently received tax benefits worth AUD 2.7 billion.
In Australia, about 1.6 million people own one investment property, and another 600,000 people own two or more investment properties.
The Annual Tax Expenditures and Insights Report, which reflects the latest operations of Australia's tax system, is expected to be released in early 2025.
Affected by recent interest rate hikes, it is anticipated that more taxpayers will apply for negative gearing for their investment properties.
Chalmers, who is currently attending the G20 and International Monetary Fund (IMF) meetings in the U.S. capital, stated that government ministers regularly seek advice and opinions from various departments on thorny political issues.
"Given our current focus on increasing housing supply, we have found better ways to invest in the construction of much-needed housing in Australia," he said.