Any tax reform that slugs property investors could drive up rental prices, the peak body for brokers claims.
Any tax reform that slugs property investors could drive up rental prices, the peak body for brokers claims.
Treasurer Jim Chalmers has hinted the government could be preparing to change the capital gains tax (CGT) discount for property investors or limiting the number of houses that can be negatively geared in the upcoming budget.
Critics of the Howard-era policies argue that, when combined, the two policies created a rush in property investor activity, drove up prices beyond the reach of the average first-home buyer and continue to advantage the wealthy.
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Chalmers has had tackling intergenerational inequality in his sights since his maiden speech to parliament in 2013, and any changes to these policies would be aimed at precisely that.
But the Finance Brokers Association of Australia (FBAA) claims forcing investors out of the market now will have the opposite than desired effect, particularly on rental prices.
"In many parts of Australia, there are 10 to 20 people or more looking at one rental property such is the lack of availability now, so why would we reduce that supply even more," interim CEO Peter White said.
"The theory that this will drive down the cost of housing to the extent where someone who can't currently afford to service a mortgage and enter the property market, will suddenly be able to, is overly simplistic and ignores the many other factors in loan approval."
Proponents of reform say removing perks for investors will dampen demand, and give first home-buyers a chance.
Matt Grudnoff, Senior Economist at The Australia Institute, believes tax concessions for property investors have skewed the market.
"The CGT discount is the biggest single incentive for investors," Grudnoff said.
"By scrapping it, the federal government will advantage first home buyers, helping more Australians into a home of their own."
Currently, the capital gains discount policy means that if you buy an asset such as a house, hold it for at least 12 months and then sell it, you only pay tax on half the profit (capital gain).
Before 1999, the actual capital gain was indexed to inflation.
Recent polling by the Australia Institute found 50 per cent of respondents agreed the government "should reduce tax concessions for property investors, such as the capital gains tax discount and negative gearing".
In March, two Labor senators endorsed a parliamentary inquiry's report which found the discount's design benefits investors over first-home buyers, and can drive intergenerational inequality.
The Greens want to see negative gearing phased out and property-related capital gains tax discounts and exemptions abolished.
The Coalition is firmly against any changes to CGT.
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