Modern Australian
Men's Weekly

.

Gradual reform to capital gains, negative gearing and stamp duty will make housing more affordable

  • Written by Richard Eccleston, Professor of Political Science; Director, Institute for the Study of Social Change, University of Tasmania

House prices may have finally peaked, at least in Melbourne and Sydney. But a slight cooling in some overheated cities makes little difference to overall housing affordability in Australia, which has declined significantly over the past two decades.

The politics around housing tax reform remains as difficult as ever. But reform to capital gains and negative gearing, alongside a shift to property taxes instead of stamp duty, would improve affordability while increasing government revenue.

Our modelling shows the key is incremental change. Gradual reform over a decade or more minimises the impact on government budgets, households and housing markets.

Read more: Three charts on: poorer Australians bearing the brunt of rising housing costs

It’s important to adopt a holistic approach to housing tax reform that considers the combined impact of the tax treatment of income from housing investment, state and local government property taxes and the interaction between housing and retirement savings.

This will take political leadership and cooperation between governments at federal, state and local levels.

Although such coordination is a challenge, there are successful precedents, such as the introduction of the National Competition Policy in the 1990s.

Capital gains and negative gearing

Gradually – over the space of a decade – reducing the generosity of capital gains tax discounts from 50% to 30% would have little impact on average “mum and dad” investors.

The exact impact depends on incomes, interest rates and capital growth.

The same applies to negative gearing where a cap on housing-related tax deductions could be phased in over a 10-year period, with an initial A$20,000 cap to be reduced by approximately A$1,500 per year (the precise amount would depend on market conditions) until it reached A$5,000.

The modelling suggests that in the first year, with a A$20,000 negative gearing cap, only 6.3% of all property investors (1.1% of all taxpayers) would be affected.

Even after a decade, only 28.5% of high income property investors would pay more tax, with the majority of “mum and dad” investors paying no more tax.

Read more: Three charts on: the great Australian wealth gap

This reform would save the federal government more than A$1.7 billion from the annual A$3.04 billion cost of negative gearing deductions.

This revenue could be reinvested in social and community housing. Over the long term, establishing a broad-based property tax is more efficient and fairer than state governments continuing to rely on stamp duty.

Complementing the changes to stamp duty and negative gearing should be a short-term simplification of stamp duty, with this gradually (over 5–20 years) evolving into a broad-based property tax.

Phasing out stamp duties

We modelled the property tax rates and thresholds each state would have to charge if they phase out stamp duties on residential properties over a decade.

Annual tax rates in the first year of the transition vary from A$47 in Tasmania to A$129 in NSW which would fund a 10% cut in stamp duties. In order to fully fund the abolition of stamp duties, annual property taxes would have to increase to A$472 in Tasmania and A$1,293 in NSW over a decade.

For the government this would be revenue neutral, but the overall tax burden would shift from prospective home buyers to those who already own residential property. This would not only improve intergenerational equity, but be more efficient and provide more stable revenue for state governments.

Gradual reform to capital gains, negative gearing and stamp duty will make housing more affordable Author provided It’s also fairer if the pension asset test reflects the value of the family home, although any changes to stamp duties or retirement savings policy should be complemented by a comprehensive deferral scheme to allow “asset rich, income poor” pensioners to be able to access the age pension and to age at home. Read more: Negative gearing reforms could save A$1.7 billion without hurting poorer investors A staged and gradual change would have little impact on average Australians, but would improve access to affordable, secure and suitable housing. This would benefit not only Australia’s community well-being, but also the economy. However, the prospects of reform will depend on how the changes are communicated and perceived. Widespread support is more likely if state and national leaders move beyond the current narrowly focused debate over taxation and promote the wider community benefits of a fairer property tax system. Now more than ever we need a holistic, long-term plan to address the legacies of the property boom and to deliver better housing outcomes for all Australians.

Authors: Richard Eccleston, Professor of Political Science; Director, Institute for the Study of Social Change, University of Tasmania

Read more http://theconversation.com/gradual-reform-to-capital-gains-negative-gearing-and-stamp-duty-will-make-housing-more-affordable-98933

How To Keep Vase Flowers Fresh Through Australia’s Coldest Months

Winter flowers develop slowly, which gives them stronger structure and longer vase life Heat from indoor environments is the biggest threat to th...

Artificial Intelligence is Powering the Growth of Australian Telehealth Services

Many Australians have traditionally experienced difficulties in accessing timely and quality healthcare, especially those who live in rural or remot...

Powering Shepparton’s Businesses: Expert Commercial Electrical Services You Can Count On

When it comes to running a successful business, having reliable, compliant, and efficient electrical systems is non-negotiable. From small retail ou...

Maximise Efficiency: Cleaner Solar Panels for Optimal Performance

Solar panels are a smart investment in energy efficiency, sustainability, and long-term savings—especially here in Cairns, where the tropical sun ...

7 Common Air Conditioner Issues in Melbourne – And How to Fix Them

Image by freepik Living in Melbourne, we all know how unpredictable the weather can be. One moment it’s cold and windy, the next it’s a scorchin...

Powering Palm QLD with Reliable Electrical Solutions

Image by pvproductions on Freepik When it comes to finding a trustworthy electrician Palm QLD locals can count on, the team at East Coast Sparkies s...

The Smart Way to Grow Online: SEO Management Sydney Businesses Can Rely On

If you’re a Sydney-based business owner, you already know the digital space is crowded. But with the right strategy, you don’t need to shout the...

What Your Car Says About You: The Personality Behind the Vehicle

You can tell a lot about someone by the car they drive—or at least, that’s what people think. True Blue Mobile Mechanics reckon the car says a l...

The Confidence Curve: Why Boudoir Photography Is the Empowerment Trend You Didn’t Know You Needed

Boudoir photography has been quietly taking over social feeds, Pinterest boards, and personal milestones—and for good reason. It’s not just abou...

Understanding Level 2 Electricians: Why Sydney Residents Need Licenced Experts for Complex Electrical Work

When it comes to electrical work around the home or business, not all electricians are created equal. In Sydney, particularly when you're dealing wi...

Retirement Anchored in Model Boat Building for Waterford’s Doug Unsold

WATERFORD — When Doug Unsold sees his ship come in, it’s usually one he’s crafted with his own hands. The 67-year-old retiree from Waterford ...

The Science Behind Alarm Clocks and Your Circadian Rhythm

Waking up on time isn’t just about setting an alarm—it’s about working with your body, not against it. At the heart of every restful night and...

How to Use Plants to Create a Calming Atmosphere in Your Home

In today’s fast-paced world, cultivating a calm, soothing environment at home has never been more important. Whether you live in a busy urban apar...

How Maths Tutoring Can Help Students Master Maths

Mathematics can be a daunting subject for many students, often causing stress and frustration. However, maths tutoring has proven to be an effective...

Refurbished iPads Are Better Than New Ones (Here's Why)

Image by rawpixel.com on Freepik Apple's refurbished iPad program has quietly become one of the best deals in tech. While everyone obsesses over the ...

Your Guide to Finding the Right GP: What Perth City Doctors Offer Today

Choosing a General Practitioner (GP) is one of the most important health decisions you’ll make. Luckily, Perth’s vibrant CBD now hosts a new ge...

Why Every Mining Operation Needs a Robust Safety Management System

Mining is one of the backbones of the Australian economy, particularly in Western Australia. Back in 2019-20, mining contributed 10.4% of Australia...

Australian Classic Literature Enjoys Resurgence

Welcome back to the good old days of storytelling! As the modern world becomes increasingly more demanding, returning to childhood favourites offers...