During the leaders’ debate last week, Albanese denied the government had requested Treasury modelling with the intention to scale back negative gearing and capital gains tax – something both he and Treasurer Jim Chalmers had confirmed in September.
“That’s not right,” the PM said, instead insisting that the government had merely sought advice. “Well, under our public service, we actually value the public service, and we value them coming up with ideas and doing assessments.”
Chalmers doubled down the following day, telling the media that the apparent inconsistency in his and the Prime Minister’s comments stems from the distinction between “advice” and “modelling”.
“I’ve said on a number of occasions now that I sought a view. Now that’s different to commissioning modelling. The Prime Minister was asked about commissioning modelling. I sought a view,” Chalmers said.
“It is normal practice to seek or receive advice on these issues from time to time. We didn’t commission modelling. The view from the Treasury is that a change to negative gearing wouldn’t get the sort of improvement that we desperately need to see in our economy when it comes to supply.”
Back in September last year, Chalmers said he had tasked Treasury with exploring potential measures to limit tax concessions for property investors. This admission came amid rising pressure from the Greens to tackle housing affordability, with the party linking support for key housing policies to changes in negative gearing and capital gains tax.
At the time, the Treasurer said: “Treasury looks at all kinds of Treasury options all of the time. It is not unusual for the public service and, in my case, my department … to examine issues that are being speculated about in the public or in the Parliament. That is how a good public service operates.”
A month later, Chalmers confirmed the brakes had been put on any changes to negative gearing and capital gains tax discounts, emphasising that the solution to Australia’s housing crisis hinges on boosting supply.
Speaking to ABC’s 7:30 at the time, Chalmers said: “I think it is primarily a supply challenge … One of the reasons why we’re not going down the path of changing the negative gearing arrangements, abolishing negative gearing or abolishing the capital gains tax discount, is because we haven’t been convinced that that would have positive consequences for supply.”
Economists have long argued this perspective. In September, AMP’s chief economist, Shane Oliver, pointed out that tax concessions account for only a “tiny fraction” of the reasons behind high housing costs. He noted that the real issue is the significant gap between housing supply and demand driven by population growth.
“Reducing the after-tax return for investors may lower house prices in the near term as investor demand falls but will likely boost them over the long term as less investors will mean less rental property supply, putting upwards pressure on rents and prices,” Oliver told InvestorDaily.
Similarly, Mark Chapman, director of tax communications at H&R Block, said that while there may be reasons to examine tax policies related to housing, substantial reform of negative gearing alone is unlikely to solve the housing crisis.
“There may be sound policy reasons for looking at aspects of tax policy around housing – many countries only allow losses on investment properties to be offset against other property income, which feels like a broadly sensible idea – but wholesale reform of negative gearing is unlikely to be the magic medicine that cures our housing crisis,” Chapman said.
The Coalition has stressed that there are no circumstances under which it would support any reforms to negative gearing.
Last year, shadow treasurer Angus Taylor said despite Chalmers’ reassurances to the contrary, he remains convinced Labor is “hard at it”.
“We don’t support a tax on housing that will reduce the supply of housing and increase the cost of housing. In a cost-of-living crisis, the idea that a tax on housing is the way to solve a cost-of-living crisis where the biggest pain being felt by most Australian households is the cost of housing, is just extraordinary. Only this Treasurer and this Prime Minister could think that is the answer to this problem,” Taylor said.
The debate over negative gearing seems to resurface every three years in the run-up to elections, with many attributing Bill Shorten’s loss in the 2019 federal election to the policy’s unpopularity.
