Presented as the most significant federal budget for decades, Treasurer Jim Chalmers delivered a budget designed to combat alleged generational unfairness particularly around housing.
The key changes have dominated media channels; removal of negative gearing for housing other than new home purchases, scrapping of the 50% capital gains tax discount and effectively removing benefits of family trust distributions.
Putting aside the bald-faced lies the government pedalled at the last election that there would be no changes to these tax settings, (I know this as the Treasurer asked me directly in 2023 how the industry would react if they made changes) the aim of the changes is to bring down house prices to help unlock more housing opportunities for younger Australians. The Prime Minister is keen to point out the move will add an additional 75,000 homes for ‘young Australians’, but that’s across 10 years or 7500 homes annually equal to 1% of yearly home sales – pitiful really and unproven anyway due to so many other market variables such as interest rates.
Effectively, the changes disincentivise property investors. The government wants your property values to fall by effectively removing 30% of the buyer pool – the investors. Allowing negative gearing for new homes which are typically built in the outer reaches of major cities, pitches investors against first home buyers who
typically target these areas because they’re more affordable. And tenants don’t want to live in the outer suburbs. Noted are the grandfathering rules allowing current property investors the right to negative gear although most of these will be, on average, positively geared by 2031 and income earned tax payable.
The changes to capital gains tax are the major impact to investors. Those lucky enough to have owned property prior to September 1985 will have until July 2027 to sell to avoid paying 30% tax. This cohort will sell those assets prior delivering no tax benefit. For every other investor, a minimum tax of 30% will apply with inflation-adjusted gains methodology applied to all investments – including shares.
The fallout over the changes will be protracted with my punt being investors as a percentage of the buying pool falling to around 5-10%. This will immediately impact rental supply. Young people, the very cohort the government hopes will support these measures, are in for a rude shock when their leases are renewed.
This budget is little more than a cynical tax grab to cover for poor fiscal management. It will damage economic growth, move us closer to recession and lower our living standards in the long run.
The Albanese government is pushing ahead with its controversial tax law changes that promises to upend property markets across the nation. By limiting negative gearing only to newly built homes and replacing the flat 50% Capital Gains Tax (CGT) discount with a more complex indexation system, the legislation tabled in parliament last week has completely … […]
The principle behind a contract is straightforward. Two parties, having clear objectives negotiate an outcome that is reasonably suited to both parties and with consensus on terms and conditions, a verbal or written agreement is formed. Both parties know those terms and are generally satisfied that there is a fair deal in place. When a … […]