Anthony Albanese has explained his rationale for dumping an election promise not to touch negative gearing, insisting another year of younger Australians missing out at auctions requires him to use “every lever” to make the system fairer.
News.com.au revealed on Sunday the government would end negative gearing as we know it, allowing only new homes to be negatively geared going forward to boost supply.
Tax concessions will remain, however, for new property investors who negatively gear new builds and new apartments. The government believes this move will encourage the supply of new homes to the market.
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Negative gearing is a tax strategy where an investment property’s expenses including interest, repairs, and rates exceed the income it generates, creating a loss that owners can deduct from their income taxes.
The big changes will kick in on budget night, which means anyone who doesn’t have an existing property they own already and plan to negatively gear, will not be able to buy another from Tuesday night and claim the tax concessions.
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‘Never get a crack’
Speaking on ABC radio, host Sally Sara asked the Prime Minister what his justification was for the backflip.
“Why are you about to break a promise?” Mr Albanese was asked.
“People are worried that younger Australians are never going to get a crack at home ownership,” he replied.
“And that’s not just the young people themselves, of course, that’s their parents and their grandparents.
“And any responsible government like ours has to take these issues seriously. We want to meet our 1.2 million new homes target. We want to use every lever possible.”
Mr Albanese then suggested the government’s existing policies had not gone far enough to shift the dial.
“I made it very clear when I went to the National Press Club that we were determined to deliver on the commitments that we’d made, and to do that quickly,” he said.
“Last year has been a year of delivery, but we also said that wasn’t the limit of our ambition.
“There’s a range of measures that we’ve had to take to respond.
“You’d recall we didn’t, certainly didn’t say that we would cut fuel taxes, but we’ve done that.
“In response to the circumstances which are there. We’ll respond the circumstances that are here now, when it comes to intergenerational equity.”
‘Easy path’ is to do nothing
Asked again how things were different in the housing crisis, Mr Albanese simply suggested they would continue if the government didn’t step with reforms.
“How they are different is that they continue to be entrenched without reform, and that’s the point,” he said.
“For a long period of time, young people have tried to save for a home.
“Another year has passed since the election, and not enough has changed, and so many people have had another year of missing out at auctions, of renting and paying someone else’s mortgage, and too many young people are close to giving up on the opportunity of owning their own home.
“The easy path is to say, ‘Oh, well, we’ll just sit back and watch that occur.’
“The difficult decision, but the right decision is to do the right thing with the right policies to deliver and clearly, people are frustrated issues like intergenerational equity.”
Rental deductions/negative gearing
Massive tax breaks, totalling $57 billion in rental deductions, are flowing to landlords.
For example, in 2022–23, around 2.4 million people claimed $57.1 billion of rental deductions, related to earning $59.0 billion of gross rental income.
Nearly half of claimants – 49 per cent (1.2 million) – had a rental loss, known as negative gearing, which added up to total rental losses of $11.0 billion.
These rental losses provided a tax benefit of around $3.9 billion in 2022–23.
Rental losses are most commonly claimed by those with higher taxable incomes, with individuals in the top 30 per cent of taxable income accruing 71 per cent of the total benefit.
Mr Albanese said the government will clearly explain any changes made on budget night.
“The government is about making the right decisions for the right reasons, for the times that you are in, and that is what we’re driven by, by the best outcome for the nation,’’ he said.
“And if we do change our position on any policy, we will explain why it is that is occurring.
“We know that a big priority of my government has been since 2022 has been housing. We’ve had the housing Australia Future Fund, we’ve had the Shared Equity scheme, we’ve had the environmental changes to fast track housing approvals.
“We’ve had the National Housing accord. We’ve had all of these measures in place. We do need to do more and use every lever at our disposal.”
PM ‘in sync’ with the Treasurer
Mr Albanese also insisted he was “in sync” with his Treasurer over the controversial changes.
“We’re in sync, as we always are,” he said.
“My government is a government that works through issues. Collectively, we’re a proper cabinet government that go through proper cabinet processes and get the right outcomes as a result of that.”
