Thursday, 16 February 2017
Questions without Notice: Take Note of Answers
That the Senate take note of the answers given by the Minister for Finance (Senator Cormann) to questions without notice asked by me today.
I would like to explain, in the five minutes I have, to young Australians and to struggling Australians who do not own a home and who want to live the dream of home ownership in this country why capital gains tax concessions need to be removed from our policy schedule. Capital gains concessions were brought in in 1999 by a Liberal government that wanted to stimulate the property market, allegedly to help drive rental supply in this country. These concessions were given to investors—investors who bought real estate. That capital gains tax concession was extended to other forms of asset classes, but primarily it was brought in to help drive investment in real estate.
Capital gains tax concessions mean that when you sell a property and you make a profit—presuming that you make a profit on the property, which most Australians do, considering we have had almost bubble conditions in capital cities such as Sydney, Melbourne, Brisbane and Perth in recent decades—rather than pay full capital gains on that investment property in line with your income, you get a 50 per cent discount, which of course makes it more lucrative for you. But what this led to is a perverse incentive—a distortion in the economy—that allowed especially investors to turn over properties quickly, to flip them, and to own a large number of properties.
The statistics are absolutely clear that, of those Australians who use the capital gains tax concession, especially in the property market, the ones who benefit the most are the wealthiest in this country. Couple that with negative gearing, which was also designed by an earlier Labor government to stimulate the housing market and drive housing supply. Those two combined together, which allow you to deduct losses against your income from owning a property, make it even more lucrative to invest in the real estate market. I do understand that there are Australians who are struggling to get ahead, that they go out of their way to work hard and invest in the property market and that they make the most of these incentives, but they are in the minority. Most Australians who benefit from capital gains tax concessions and negative gearing are wealthy Australians.
Here we have a situation in this country where we have a housing affordability crisis, where young Australians have no hope and almost, sadly, no expectation that they are going to be able to buy a property, let alone an investment property. I think our current Secretary to the Treasury said that the 'bank of mum and dad' was where young Australians were most likely to ever get their first home. We also have low-income Australians who will never break into the property market, who have to rent properties, if they are lucky—if they are able to get a rental property and able to afford that.
So I ask you a simple question. We know that these concessions that were put on property investment in this country nearly 20 years ago are causing a distortion. We know they are adding to the housing affordability crisis. All the experts tell us this. Even the Business Council of Australia has a policy to reduce capital gains tax concessions—even the Business Council of Australia does. The question is: why won't this government remove these distortions, if we know they are going to play a key policy role in making housing more affordable for young Australians and for low-income Australians? That is the question that I would like answered by this government.
They always say, 'We need to release land supply,' and that is also true. That is an important part of this. But we know that this distortion in the market needs to be removed. Everybody tells us that, but it is not. My guess is that there are very powerful interests behind maintaining these schemes and incentives. The Property Council of Australia and other groups want to see these in place and lobby the government really hard.
One thing that does give me some hope is that the government has been clear and a little bit tricky in its language. It said it will not adopt Labor's policy for removing capital gains tax concessions, but it may have another policy prescription that we will hear about in a few months. It is a break in the clouds in the storm that maybe this government is going to tackle revenue crisis in this country. (Time expired)
Question agreed to.