Cabinet Minister Josh Frydenberg has called Australian Labor Party’s new tax plan “a joke.” He was referring to Labor’s new proposals on negative gearing. The minister said the resulting savings will not even cover Australia’s monthly interest bill.
The new tax plan was proposed Labor’s Shadow treasurer Chris Bowen. His proposed changes pertain to changing norms in negative gearing from mid-2017. He said it would promote a level playing field for new home buyers. His tax plan advocates slashing of capital gains tax discount to 25 percent from the existing 50 percent. Bowen claimed the reformed tax plan would boost the budget by $32.1 billion over 10 years.
“A first-home buyer turns up at an auction with very little government support … while an investor turns up at an auction with the most generous tax treatment in property investment in the world,” Bowen told the ABC.
Frydenberg dismissed such changes as costly. He said it would only shoot up the price of new homes besides adding more pressure on first-home buyers.
The minister said the government is already looking at negative gearing as part of the tax reform process. But he pointed out that 70 percent of those availing negative gearing are having income less than $100,000.
The Sky News report said the proposal was also backed by Labor frontbencher Mark Dreyfus. He said that Bowen’s plan would make housing more affordable. Meanwhile, many analysts said reforms in negative gearing should cut down the liberal capital gains tax (CGT) discount. But industry groups cautioned against any unilateral tinkering. They called negative gearing a “dangerous territory.”
“I think it is a real concern that the government is contemplating changing negative gearing, given property is one of the few areas of the economy that’s functioning,” Property Council of Australia’s chief of policy and housing Glenn Byres said, Domain News reported.
AMP Capital chief economist Shane Oliver said the most sensible solution would be to revise the “generous” capital gains tax discounts.