Federal Opposition Leader Bill Shorten will announce plans on Saturday to change negative gearing and the capital gains tax discount if Labor wins the next federal election.
Under costings released from the Parliamentary Budget Office, the measures could save the budget $32.1 billion over 10 years once they come into force.
The key measures are:
- Negative gearing to be restricted to “newly constructed homes”
- Capital gains tax discount reduced from 50 per cent to 25 per cent
- Both measures would come into force from July 2017
- All existing investments under the scheme would be fully “grandfathered” and protected against the changes
Mr Shorten will unveil the plans at the NSW Labor conference in Sydney, in what he claims will be the “most important structural reform in a decade”.
He will tell the conference the plan will help “level the playing field” by targeting what he calls are “entrenched” tax subsidies.
“We will put the great Australian dream back within reach of working and middle-class Australians, who have been priced out of the market for too long,” Mr Shorten will say, in a pre-prepared speech provided to the ABC.
“Our new economic policy will encourage the building of thousands of new homes every year and increasing housing supply, it will help lower costs for renters and it will return the Commonwealth budget to a sustainable foundation.”
Mr Shorten will promise existing investors who access negative gearing will be “no worse off” and there would be no changes to the capital gains tax rules on existing assets, including the family home.
Investments made by superannuation funds would not be affected under changes to capital gains tax, with the discount for small business assets to remain unchanged.
Labor wants to ‘take the heat’ out of housing market: Bowen
Shadow treasurer Chris Bowen said the reform would put first home owners and buyers “on a more level playing field”.
Mr Bowen told Channel Nine that current investors would also be protected from the changes.
“Every single investor who’s already got an investment will have that grandfathered,” he said.
“We do have a housing affordability crisis in Australia … We need to make sure that negative gearing will remain, but that it is fair and that it is sustainable.”
Mr Bowen said Labor wanted to “take the heat” out of the housing market and help create jobs by shifting the focus onto new homes.
Figures from the McKell Institute suggest up to 25,000 new jobs could be created in construction each year if the changes to negative gearing increased the number of new homes and apartments being built.
Under figures from the Parliamentary Budget Office, the savings would be minimal for the first financial year, at $15 million in 2017-18 but quickly increase to $580 million in 2018-19.
The Federal Government in recent weeks has indicated it is also looking at negative gearing as part of its overhaul of the tax system.
Superannuation tax concessions could also be in the mix, although the Coalition has begun backing away from the prospect of a hike in the GST.