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Negative Gearing and Capital Gains Tax

The UDIA has welcomed the Turbull Government’s announcement that there will be no changes to negative gearing and capital gains tax.

National UDIA President, Michael Corcoran, said “There has been much speculation about the government’s position on negative gearing and capital gains tax and this has caused uncertainty for the industry and investors which has harmed investment in an industry which constitutes 10% of the Australian economy”

“The combination of negative gearing and capital gains tax creates a rational incentive for private investment in into low yielding rental housing. This is essential to help supply keep up with demand, keep rents affordable and increase growing housing supply for our growing population. When considering whether or not to make an investment, investors assess negative gearing and capital gains tax working collectively.”

UDIA modeling, validated independently by Macroplan Dimasi, demonstrates that a median priced investment house under current negative gearing and capital gains tax arrangements still delivers between $43,897 and to $71,699 net revenue to the federal budget bottom line. Additionally, the current arrangements are key to the federal government not having to invest billions of dollars in public rental housing like the UK government. The modeling undertaken by UDIA was key to UDIA’s successful advocacy to government, and most particularly especially Treasury, in prosecuting the case for no change to negative gearing and capital gains tax.

The UDIA continues to express deep concerns with the traction the media is giving to commentary on negative gearing and capital gains tax.  We believe that many proposals in the public domain would escalate rent prices and cause falls in the price of established houses as investors are all forced into the new dwelling market. Even seemingly little changes such as the reducing the discount could see property investors paying more than 200% in more taxes.

“The current negative gearing and capital gains tax arrangements are already a boon for government as they are a net contributor to federal budget revenues and also reduces federal government housing expenditure by billions of dollars. Why increase taxes on private investment in low yielding rental housing when the current arrangements already contribute to budget revenues as well as delivering much needed rental housing stock? Changing the policy will hurt the people that many commentators are claiming they are trying to protect.

“Generally speaking, the changes will spike rental prices, cause falls in the value of the family home and reduce supply of needed rental housing which is derived from both established and new housing stocks. Additionally, many first home buyers, who see building a new home as their path to home ownership, will be outbid in the new home market by investors who have been forced into this one segment ” said UDIA President Michael Corcoran.

This policy promises to be a major issue in the upcoming election.  UDIA will continue to strongly advocate against the tidal wave of opinion against negative gearing and capital gains tax and protect the interests of the development industry and investors throughout the campaign.

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