Local councils, power providers and water utility businesses will share in $2 billion in Tuesday’s federal budget to build critical infrastructure that the Albanese government says will support the construction of up to 65,000 homes across the country.
As this masthead revealed on Saturday, this week’s budget will be heavily focused on housing, including changes to its tax treatment for investors and incentives to build new properties.
The $2 billion, to be spent over four years, is aimed at so-called “enabling infrastructure”, which is necessary for housing to be built. It covers roads, water, power and sewerage, with the cash to be spread among local councils and utilities providers.
A quarter of the $2 billion will be set aside for regional areas. The government estimates up to 65,000 additional homes will be built over the next decade because of the infrastructure financed by the program.
The funding comes on top of $3.1 billion to support the construction of 100,000 properties for first time buyers, and $1.2 billion in separate financial assistance to the states and territories for housing infrastructure.
Treasurer Jim Chalmers said that building more homes would be an important element of Tuesday’s budget.
“In this budget, we’re investing billions of dollars to build more homes for Australians,” he said.
“Right now, it’s too hard for too many Australians to get into their own home and get ahead, and that’s why we’re investing in supply. Our housing plan is pro-aspiration and it’s pro-investment.”
The policy is similar to the promise made by then Liberal leader Peter Dutton ahead of last year’s federal election to pump $5 billion into infrastructure for roads and water, which he claimed would help support the construction of 500,000 properties.
But the government is also poised to use the budget to unveil changes to property tax breaks that the Coalition is already vowing to oppose.
Chalmers is expected to announce the current 50 per cent capital gains tax concession will be returned to its pre-1999 form, under which the value of assets was adjusted for actual inflation, with the tax applied only to the “real” increase in value.
He is also expected to announce restrictions on negative gearing, the process under which property investors can use losses on their rental properties to reduce their entire taxable income.
Shadow treasurer Tim Wilson warned that changes to the CGT concession would “kneecap” young Australians who had invested their first home deposit savings.
In a sign of the political fight facing the government over any change to property tax concessions, the Coalition has created a website to capture stories from people about what the as-yet-unannounced reforms may do to the housing market.
Wilson said young people were “resentful” that their savings were tax-free if held in a home while risking a 47 per cent rate if invested elsewhere. The top income tax rate of 45 per cent, plus the 2 per cent Medicare levy, applies to incomes over $190,000.
“Young Australians invest their home deposits to increase their savings and bring home ownership forward, but under the treasurer’s broken promise, their tax could be doubled and home ownership kneecapped,” Wilson said.
The budget will also contain a productivity package that will feature initiatives aimed specifically at the housing sector.
It plans to cut by six months the time taken for migrant tradespeople to enter the workforce, after a report by former senior public servant Martin Parkinson revealed that there were many qualified people in the country effectively barred from using their skills in the construction sector.
As this masthead revealed last year, tradies including builders, plumbers and electricians often face fees of up to $1600 to access mandatory Australian standards on everything from solar panel installation to electrical wiring. These standards will now be free to construction, occupational health and safety and product safety firms.
The current $20,000 instant asset write-off for small businesses will be made permanent.
Along with other reforms, the government estimates its productivity package will cut red tape costs by $10 billion a year while lifting GDP by $13 billion annually.
Housing Industry Association managing director Jocelyn Martin said the package was a significant step towards addressing declining productivity in the residential building sector.
“Free access to Australian Standards alone will remove a major and unnecessary cost on builders, tradies and small businesses, while improving compliance, safety and consistency across the industry,” she said.
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