In the land of sun and surf, where the Australian dream of owning a home has long been a cherished aspiration, a stark reality is casting a shadow over the hopes of many. Policies that once aimed to encourage investment in housing are now being blamed for worsening affordability, with tax breaks for investors driving up competition and pricing out first-home buyers.
Is the once-attainable dream of owning a home slipping further out of reach for countless Australians?
A recent report by the Australian Council of Social Service (ACOSS) has shed light on a troubling aspect of the nation’s tax system, revealing how two significant tax breaks are not only lining the pockets of the wealthiest Australians but also exacerbating the housing affordability crisis.
The report takes aim at the capital gains tax (CGT) deduction for property, which allows only 50 per cent of capital gains made from an asset to be taxed upon its sale, and negative gearing, a policy that permits investors to deduct property investment expenses from their income.
These tax concessions are designed to encourage investment and economic growth, but the recent findings suggest that they are ‘disproportionately’ benefiting the richest 10 per cent of households.
This elite group, according to the report, owns a staggering two-thirds of all investment properties in the country and receives a lion’s share—82 per cent—of the $16 billion in tax relief provided by these two tax breaks. Furthermore, they account for 39 per cent of all tax deductions for rental properties.
Dr Cassandra Goldie, ACOSS chief executive, has voiced concern over the impact this is having on society, stating, ‘These tax breaks disproportionately benefit the well-off in our society while millions struggle to pay the rent, let alone save a deposit to buy their first home.’
The report also highlights a worrying trend since the introduction of the CGT discount in 1999: average house prices have soared by 142 per cent, while wages have only increased by 44 per cent. Meanwhile, a staggering 81 per cent of investor loans are for existing properties, which does little to add to the housing supply and puts upward pressure on prices.
The consequences are dire: the transition from renting to homeownership becomes increasingly difficult, and the levels of unaffordability reach ‘unprecedented’ heights.
‘Australia’s absurdly generous tax breaks are supercharging the housing crisis and rising inequality in our society,’ Goldie asserts.
ACOSS is calling for a recalibration of these tax policies. Their proposal includes reducing the CGT deduction from 50 per cent to 25 per cent over five years, restricting negative gearing to new investments, and halving the CGT deduction for super funds.
These measures could potentially generate an estimated $19 billion over four years, funds that ACOSS suggests could be reinvested into building 47,000 new social and affordable homes annually.
The government, for its part, has outlined housing policies that include the construction of 1.2 million new homes by mid-2029, a $9.3 billion agreement to support social housing and homelessness services, and schemes to assist households in purchasing homes.
Additionally, tax incentives are being offered to encourage investment in new build-to-rent developments, including an increase in the capital works tax discount depreciation rate.
Yet, the question remains: will these policies be enough to counteract the effects of the tax breaks that have so far favoured the wealthy and contributed to the housing crisis?
We invite you, our YourLifeChoices readers, to share your thoughts and experiences on this issue. Do you believe the proposed changes to tax breaks will make a difference? Join the conversation in the comments below.
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The tax breaks mentioned in the article certainly do contribute to the high cost of houses in Australia, but there are other factors as well such as high immigration and too much red tape attached to construction.
These tax breaks achieve nothing worthwhile for the country and serve only as a tax break for wealthy investors so should be removed and any additional taxation revenue the government receives after the concessions are removed put towards constructing affordable housing.
If we want to restrict the benefits for the “ultra-rich” and massive corporations, but at the same time provide some incentives for the average mum-and-dad investors, why not have the existing benefits only available for the first two, or three, investment properties owned by any individual? That encourages small investors to make extra homes available for the rental market (which is also under pressure), but limits the factors which are apparently putting upward pressure on housing prices and therefore, availability.
We have had up to 3 investment properties at a time while we were working, and certainly appreciated the negative gearing and CGT benefits at the time. Meant that by the time we retired, we were able to purchase our home debt-free. Only took us 45 years from when we bought our first home, with 10% deposit and 90% mortgage, to buying our current home with no mortgage.
There have been 450,000 plus people allowed into the country per year, since the last election.
If there are more disincentives to future landlords buying properties, then they’ll just invest in something else, reducing rental stock.