Experts: Eliminating tax breaks won’t fix housing crisis, but could make a difference

9News

2 weeks ago

Experts: Eliminating tax breaks won’t fix housing crisis, but could make a difference

Phasing out negative gearing may not solve Australia’s housing crisis, but reforming the controversial tax write-off could have a meaningful impact, say economists.

Under negative gearing, taxpayers can claim deductions when the cost of owning an investment property outweighs its generated income.

Phasing out negative gearing may not solve Australia’s housing crisis but reforming the controversial tax-writeoff could have a meaningful impact, say economists. (Peter Rae)

One factor that incentivizes negative gearing is the capital gains tax discount, which applies to half of the profit made when a house that is held for at least 12 months is sold.

The Treasury modeling, revealed yesterday, comes as opponents – including the Greens and other crossbench parliamentarians – claim the two tax policies are worsening the housing crisis.

Prime Minister Anthony Albanese has downplayed any movement on the issue, maintaining the federal government’s focus was building more homes.

Professor of Economics at UNSW Business School Richard Holden believes getting rid of negative gearing could “make a real dent” in the market.

“My view is it’s a good thing to revisit, it’s an opportunity given how acute the housing affordability crisis is at the moment,” he told 9News.com.au.

Economist Saul Eslake wants to see negative gearing at least phased out for investors in established housing.

“Over 75 per cent of property investors purchase an established dwelling, rather than a new one, which means that they increase the demand for rental housing by outbidding would-be homebuyers, by exactly the same amount as they increase the supply of it,” he said.

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