Brokers Warn: New Tax Reform Could Lead to Rising Rent Costs for Property Investors

Critics of the policies established during the Howard era argue that these measures have spurred a surge in property investment activity. As a result, housing prices have escalated, putting them out of reach for typical first-time homebuyers and continuing to favor the affluent.

Since delivering his inaugural speech in Parliament back in 2013, Chalmers has been focused on addressing intergenerational inequality. Any proposed changes to these policies would target this very issue.

However, the Finance Brokers Association of Australia (FBAA) warns that pushing investors out of the market now could backfire, especially concerning rental prices.

“In various parts of Australia, we see 10 to 20 or more people vying for a single rental property due to the current shortage,” stated interim CEO Peter White. “Why would we want to further reduce that already limited supply?”

White further elaborated, “The idea that housing costs will drop to a level where individuals unable to currently afford a mortgage will suddenly find it feasible to enter the market is overly simplistic. It overlooks the multitude of factors involved in loan approval.”

Proponents of reform say removing perks for investors will dampen demand, and give first home-buyers a chance.

Matt Grudnoff, Senior Economist at The Australia Institute, believes tax concessions for property investors have skewed the market.

“The CGT discount is the biggest single incentive for investors,” Grudnoff said.

“By scrapping it, the federal government will advantage first home buyers, helping more Australians into a home of their own.”

Currently, the capital gains discount policy means that if you buy an asset such as a house, hold it for at least 12 months and then sell it, you only pay tax on half the profit (capital gain).

Before 1999, the actual capital gain was indexed to inflation.

Recent polling by the Australia Institute found 50 per cent of respondents agreed the government “should reduce tax concessions for property investors, such as the capital gains tax discount and negative gearing”.

The Greens want to see negative gearing phased out and property-related capital gains tax discounts and exemptions abolished.

The Coalition is firmly against any changes to CGT.

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