Australian Treasury Secretary Steven Kennedy has said the government should focus on boosting supplies instead of implementing new taxation measures to address the current housing crisis in the country.
This comes amid the Greens’ push for the abolition of negative gearing and capital gain tax discounts, which they argue would help renters and first-home buyers.
Negative gearing occurs when the costs of owning an asset, including interest payments, are greater than the income it generates from rent, resulting in a loss.
Investors hope to offset these losses by making a profit when selling the property. These losses can be used to claim tax deductions against other sources of income, such as salary and wages.
Meanwhile, the capital gain tax discount allows individuals to pay tax on only 50 percent of the capital gain when they sell an asset, provided they are Australian residents for tax purposes and have owned the asset for at least 12 months.
At a recent budget estimate hearing, Greens Senator Nick McKim questioned Kennedy about whether the Labor government had considered winding back these tax breaks.
The Treasury Secretary responded that the issue was not currently under consideration by the government.
“It is a complex area, and I would encourage people not to rush to judgment,” Kennedy said.
Government Should Focus on Boosting Housing Supplies: Treasury Secretary
When asked about the impact of potential tax policy changes on the housing market, Kennedy said that while his department had looked at the issue for many years, the primary factor influencing the housing market today is the shortage of available dwellings.“We tend to look at it more from the point of view of tax reform rather than potential changes to the tax system over time,” he said.
“From the point of view of housing, I think the dominant impact on the housing market at the moment is simply not building enough dwelling units.”
The secretary also warned that a change in tax policies would affect the ownership patterns of the housing market and lead to unexpected consequences.
“We didn’t make these tax changes yesterday. They’ve been persistent features of the tax system,” he said.
“So, we think that the things that are driving movements in the housing market at the moment are not predominantly coming from the tax system.”
As such, Kennedy said he encouraged the government to remain “firmly focused” on increasing the supply of public affordable housing as well as housing in a broad sense.
“I wouldn’t go as far as saying it [changing tax policies] is a distraction,” he said.
“We should always be debating and trying to understand where the tax system is at, but to resolve the issues that we face at the moment, we simply have to increase the supply of housing, and that should be our primary focus.”
