The federal government is exploring potential modifications to negative gearing and capital gains tax concessions, a move that could significantly impact the upcoming federal election.
Treasury has been tasked with providing expert advice on possible changes, including modelling on negative gearing that may involve alterations to capital gains tax concessions, according to The Sydney Morning Herald.
While the government is considering these changes, there’s a possibility they may opt not to pursue any policy modifications.
The potential reforms come after years of debate over billions of dollars in annual tax benefits.
The Greens are pushing for an end to these tax breaks, while the Coalition warns of potential harm to investors.
Treasurer Jim Chalmers previously indicated the need for a “public conversation” about the sustainability of Australia’s current fiscal settings, including $250 billion of annual tax concessions.
Experts suggest that overhauling Australia’s capital gains tax system could improve the budget by $5 billion annually.
However, the Real Estate Institute of Queensland (REIQ) has expressed alarm at the prospect of changes to negative gearing.
REIQ CEO Antonia Mercorella said the potential repercussions of such changes, particularly in the current housing climate could be dangerous.
“As repeated studies have shown, there is a minimal link between negative gearing and higher house prices,” Ms Mercorella said.
“To make a major change to the rental sector during a time of low vacancy rates across Australia and long social housing waitlists could be catastrophic for the housing sector.”
Ms Mercorella warned that abolishing negative gearing could eliminate economic benefits, fail to address housing affordability and impact everyday Australians the hardest.
She also said that such changes could exacerbate existing pressures on the rental market, further straining households already grappling with rising living costs.
“It is particularly disappointing given the new Federal Housing Ministers’ statement in August that the government had no intention of changing the current negative gearing system,” she said.
“The housing market requires stability and predictability, especially in these challenging times.”
The REIQ has urged the Federal Government to consider the implications of such changes and to engage in meaningful dialogue with stakeholders to ensure the sustainability of the rental market.
