The New South Wales government has targeted controversial tax breaks for property investors, suggesting they are pushing first-time homebuyers out of an increasingly competitive property market.
- State government wants capital gains tax cut to be revised
- Currently, people who have owned real estate for more than a year only have to pay tax on half of the profit it makes if they sell it.
- Liberal MP chairing housing affordability survey agrees tax review should be considered
In a submission to a federal housing affordability survey, the state government suggests that the federal government revise the 50 percent capital gains tax cut.
He also said the government should consider adopting something similar to an abandoned labor policy in an attempt to redress the imbalance.
He argued that the rebate – which offers significant tax relief for those who sell properties they’ve owned for 12 months or more – push first-time homebuyers to favor investors.
The federal Labor Party adopted a policy of halving the capital gains tax cut in the 2016 and 2019 elections, but abandoned the policy earlier this year along with proposed changes to the negative gear.
NSW’s submission suggested it was time to put tax reform back on the table.
“While the combined effect is likely to be a moderate increase in house prices, the most significant impact is the displacement of owner-occupiers (including first-time buyers) of the property by tax-advantaged investors, primarily those who already have higher incomes. “
It is not specifically asking for the adoption of the old labor policy, but rather for a revision of the policy.
“The federal government should review tax parameters, including the 50 percent capital gains tax cut on properties held for more than 12 months, and consider reforms to ensure an appropriate balance between purchases of properties for investment and occupancy reasons, ”he added. noted.
Nationally, the housing market is growing at its fastest pace since 1989.
According to real estate data service Corelogic, house prices have risen more than 20% year-over-year, and the proportion of first-time homebuyers who are cracking up in the market is declining.
The median price of homes in Sydney is over $ 1.3 million.
The NSW government recognizes that factors such as low interest rates and the supply of housing are important factors that determine house prices, but says the federal government has levers that could improve affordability.
Liberal president says tax should be on the table
The Coalition campaigned against the Labor Party’s proposed changes to the capital gains tax and negative debt, with Prime Minister Scott Morrison warning they risked “causing a real estate crash”.
But Liberal MP Jason Falinski, who chairs the Housing Affordability Inquiry, said there was room to consider a change.
“This problem is so serious and its impact on Australians under 40 is extraordinary – there is no idea anyone should take off the table,” he said.
He said it was a more complex solution than it looks, given the tax cut applied to all assets, not just property.
And he said he was certainly not opposed to the capital gains tax review, but that its influence needed to be put into perspective.
“Economists who have looked at the impact of capital gains tax relief, as it applies to housing, seem to be saying it has an impact – it’s between 1 and 4 percent,” did he declare.
“The biggest impact is planning, and that’s what really causes the affordability issues we have in housing.”
Mr Falinski steered the investigation towards the issue of supply, arguing that this is by far the biggest problem that needs to be addressed to improve affordability.
He strongly criticized the NSW government’s handling of its own planning system and the problems it suggested it had created.
“What disappointed me about their submission was the constant refusal to accept that they created one of the worst planning systems in the world,” he said.
“And that translates into under-supply.
“The result of the under-supply is that they have one of the least affordable housing markets in the world, and that’s just not good enough.”
NSW wants help getting rid of stamp duty
NSW has long expressed a desire to remove the stamp duty and replace it with a broad-based property tax, and ACT is already in the process of doing so.
Stamp duty is charged to buyers at the time they make a purchase, which dramatically increases the cost of buying a home.
NSW’s submission describes it as the state’s “most inefficient tax” and estimates that it adds two and a half years to the time it takes an average full-time worker to save on a filing.
He argues that the Commonwealth could do more to help states and territories remove the tax through “incentives.”
But Mr Falinski said he agreed the stamp duty should go, but the state had the ability to use current cheap funding to do so without help from the federal government.
“There has never been a better time,” he said.
“I mean, now is the time for state governments to do it when interest rates are as low as they are, and they should grab that time while they can.”