Young Aussies screwed by property and super lurks

By Leith van Onselen

In mid-2014, Prime Minister Malcolm Turnbull acknowledged that Australia’s tax settings favoured wealthy older people over younger people:

“Looking at Australia’s tax regime you would say that it is too tough on people earning income… but is incredibly concessional to older people who have made their money…

All of these areas are very hard to deal with because any change invariably… [leads them]… to become very angry. That’s why reform is very difficult…”

Today, The Australia Institute (TAI) has confirmed the Prime Minister’s view, releasing data from modelling commissioned from the National Centre for Social and Economic Modelling’s (NATSEM) own database, together with ATO statistics, which shows that young Australians are receiving few benefits from three of the budget’s most expensive tax concessions: superannuation, negative gearing and the capital gains tax (CGT) discount.

According to the media release:

“Australians under 30 years of age receive only 6.4% of the combined tax concessions on superannuation, the capital gains tax discount and negative gearing,” Executive Director of The Australia Institute, Ben Oquist said.

“In total these concessions are worth more than $37B yet the young receive only $2.4B of their value.

“The capital gains tax discount and negative gearing are particularly unfair for the young, with the under 30s taking approximately 1% of the benefit of tax breaks worth $7.7B a year and climbing.

“It is a double hit for the young with many being priced out of the home owning market in part because of the very tax concessions they are mostly missing out on.

“It is often argued that tackling tax concessions is politically difficult, but the reality is that the bulk of the concessions flow to a relatively small proportion of the population and this is particularly true when it comes to younger Australians.”

“Australia has a revenue problem. A 2016 Budget that fails to recognise this will lack fiscal responsibility, economic credibility and fairness – particularly for younger Australians.

“Tackling tax concessions will not just be good for the budget and fairness, we now know it will help level the playing field for the young who get little from our distorted tax system.

“The Government has made much of the importance of intergenerational equity, there is nothing equitable about retaining expensive tax concessions that deliver a fortune to wealthy members of certain generations and virtually nothing to younger generations,” Oquist said.

The below chart summarises the situation across age groups:

ScreenHunter_11534 Feb. 16 08.05

As you can see, the proportion of the three tax concessions combined that go to those aged under 30 is only 6.4%, whereas it is 28% for those aged 50 to 59, and 26% for those aged 60 years or older.

Property taxes are the worst, with under-30s receiving just 1% of the negative gearing benefits:

ScreenHunter_11535 Feb. 16 08.09

And just 2% of the CGT benefits:

ScreenHunter_11536 Feb. 16 08.10

Meanwhile, baby boomers are making out like bandits.

So, Malcolm, are you gonna fix it?

Full briefing note here.

Unconventional Economist


  1. I’m not defending the status quo. But doesn’t that make sense to a point because the older you are the more time you have had to aquire assets? Hence greater share of the magic pudding?

    Even if our tax system treated all equally older people will always have a greater share?

    • That’s a fair comment. Though you only have to remember Howard and how much his party threw money at older voters……… CGT concessions and neg gear perks you can argue are more likely exploited in your lifecycle when assets are accumulated, however the Super concessions which were insanely generous at one point and still are now benefited boomers more than any other gen because everyone else is saving for a home, building a life, NOT transitioning into retirement like boomers are…..

      • I guess CGT being halved and the super torts were brought in for the boomers. And they will be removed once they have extracted the life out of them. So I guess you’re right on that point.

    • Correct, and as young people become older, then they in their turn get concessions. Unless, of course, as MB advocates, the concessions are withdrawn.

      Of course, young people also get a big chunk of the education budget free, or at concessional rates. Plus childcare, plus children’s health services, plus a whole lot of other concessions ranging from public transport to movie tickets, all of which are substantial when added up.

      This is a beatup.

      • Really UE?

        If young people get those benefits as they age, what’s unfair about it?

        The only way those young people won’t get those benefits in their turn is if you cut them off. Now that’s unfair. Dress it up how you will.

        This intergenerational hate stuff is just tiresome and intellectually sloppy.

        • Mate the only intellectually sloppy one is you, who cannot recognise that there is one group of people (the young) that are being shafted by current policy settings – be it tax, housing policy, etc.

          Keep burying your head in the sand mate.

      • Surely this is troll?

        Let’s see:
        – Education: Free to higher and higher costs
        – Health: Free to US style
        – Housing: Affordable on single income to Not affordable on double income (but childcare hell yeah!)
        – Retirement: Retiring when you can still move a bit to retiring when you are basically 70
        – Aged benefits: Accessing pension in addition to the honey pot super at the same time, compared to there will be no pension and you will get reamed with super.

        Seems legit.

      • Calvin, that’s the way it’s going. I don’t agree with that direction. However, it has been cheered on by neocons for the past thirty plus years. But if you think that having done all that, cutting so that present youth will have nothing to look forward to is a good idea, I will have to disagree.

        AK, that figure is per person…of course the number of persons drops off dramatically after age 80. But it also does not detract from my point that if young people in their turn receive exactly the same benefits as they age, how is it unfair?

      • One thing you can bet on is that while the current cohort of 60-65 year olds will extract the benefit of tax free super payouts etc. the gate will absolutely be closed on those who follow. “Grandfathering” of existing benefits will be the buzzword. That will happen irrespective of anything MB says.

      • emessy…. please understand that if you don’t have the assets you don’t get the benefits and as it stands the boomers are going to screw over 3 generations by holding all the assets till they die and hopefully that is soon

      • Alby,

        The process was started by Thatcher, Reagan and pre-boomers. Continued by boomers AND gen X, and now Gen Y. That’s it, 4 generations buying into the neocon crap. And it’s only the boomers? Doh! The stupid! It hurts.

      • I hope it hurts a lot messy I really do…. is that you skippy?

        ok what I get from boomers in straya when I ask do they think the current situation is fair is “its not my fault the house I bought for 10 grand is now worth 2 million dollars” and it isnt but please, show some class and actually realise what its done to the country

      • I know exactly what it’s done to the country. However, until ALL who are complicit ‘fess up and change their ways, nothing will change. Gen Xers who are in it up to their necks trying to avoid the consequences by blaming boomers are part of the problem. It’s got little to do with intergenerational issues since everyone from preboomers to gen y are involved in supporting the system.

      • “Unless, of course, as MB advocates, the concessions are withdrawn.”

        Or the reality of their unsustainabe nature hits us in the face and they are withdrawn

      • I will agree with that emessy but the boomers control the system right now and own nearly everything but are too self absorbed to change – probably busy chewing through 50 liters of fuel per 100kms towing half a house to broome while on the pension

      • Alby, we’ve had finely balanced Parliaments for years, and enough Gen x politicians for years as well. Heard a peep from any of them? Other than excuses? Any gen x getting up at party conferences? Nope. In the papers? Nope. On social media? Nope.

        To be fair, it’s people here that at least are aware of the issues. But, Gen x, having willingly followed neocon voodoo economics, said bugger all about it, have zero right to complain about the outcome. I have some sympathy for gen Y, but even they are following the failed neocon agenda with little sign of remorse.

        The system is buggered, so fix the system rather than fap around like a mob of public servants whose only instinct is to find someone else to blame for their own fuckups. This isn’t about intergenerational equity, it’s about a broken system. A system broken by a succession of generations who rather than fix the system, only want someone other than themselves to blame.

      • Jumping jack flash

        Ha! Dump truckloads of cheap money into an economy where being a landlord was and still is heralded as the pinnacle of personal achievement, add in, or rather point out, some concessions for good measure, and you get our current situation. It wouldn’t have played out any different. The driver was, of course, those truckloads of cheap money. Don’t ever lose sight of that fact.

        Thank your deity of choice that the cheap money didn’t work its way into utilities prices and essential consumables like supermarket items… oh wait…

        But its ok, mate, the cost of living may be high from all those truckloads of cheap cash, making their way around, but everyone who’s anyone has got a houseload of money in the bank to pay for it.

        Can’t find a buyer to get you your houseload of cash? Not a problem, ship some in. Who doesn’t want to live in this fine country?


      • emess isn’t it easy to say all that as a boomer having sucked the country dry – its all our fault someone else fucking fix it

      • No alby, until everyone who bears responsibility, preboomers, boomers, gen x, ALL accept responsibility, nothing will change. But if you think useless venting helps…I’ll leave you to it.

    • adelaide_economist

      The age impact you refer to is real but not really the issue at hand. The capital gains tax exemption, as an example, led to then current owners of housing getting a windfall gain as that tax break was capitalised into their asset value. Anyone who didn’t own (or was too young to have bought) was permanently set back on the biggest purchase of their lives.

      This is the kind of inequity in taxation policy that instead of being discussed ends up with comments sections on major media outlets degenerating into complaining about ‘young people’ buying iphones or not working hard enough. Oddly enough though, ‘one off’ changes – say to incorporating the family home in even a very generous asset test for the pension – is absolutely unacceptable because it’s… unfair. LOL.

      • Ok, I’ll gladly give my house to the government in return for the pension. I don’t qualify now, but quite happy to exchange part of my wealth for a pension. If gen x want the parental home to go to the government, I have no objections.

        Quite the opposite.

    • Yes, the older you are the more assets you’d have. But why would you then give them added incentives to acquire more assets???

    • It’s skewed towards anyone with wealth, whether they’re 55 years old and earned it themselves or a 22 year old inheriting such wealth.

  2. Of Course Not! He’s going to smile that investment banker smile, grinning like a stunned mullet, while trying some more soothing platitudes as an excuse for no action.

    • proofreadersMEMBER

      +1 Dear Leader PMT knows which way his bread is buttered. As he said in mid-2014, people “become very angry” when they have party drugs withdrawn and anyway, he’s too busy doing what he was always been meant to – “born to rule”.

  3. Grattan wants to help Australian youth by turning the family home into a pension debit card. I’m sure that will help youth by not getting much of an inheritance. But I suppose once NG is gone Sydney will become affordable, international property investors will stop buying and Warrick Mckibbin will be proved wrong after all.

    • The vast majority of inherited wealth goes to already wealthy pre-retirees in their 50s and 60s, not young people trying to make a start. (The Grattan guys have done some awesome charts on it).

      • Lots of Intergenerational fairness talk, but I don’t see too much benefit to non boomers in the solutions being proposed.

  4. So people under 40 get about 20% of the concessions. But what are under 40’s like me doing? Nothing! Why? Because the majority of my age group gets carried away with side issues like Gay Marriage etc. Look at the top story in the Melbourne papers – A divorced Garry Lyon having an affair with a friends’ ex-wife. This is not a story!! Being stolen from by these tax rorts is the story, but the under 40’s are evidently not listening

    • Who do you think has more control over what’s in the news ? The ones publishing it, or the ones consuming it ?

      • Some news websites work by putting the most often clicked stories to the top of the page in larger font and with pictures etc. Therefore the person consuming the news has some say over the most prominent content. If no one was clicking the Lyon story then, on the age website, it would stay much lower on the page in the Sport section and not be in huge letters on the top of the page

  5. The probable unintended consequence is to really screw over the young buyers of the last few years.

    If Labor’s policy comes in there must be a real chance that the value of established homes will fall through reduced marginal buyers and the people who will suffer most will be the young first home buyers of the last year or two whose equity will be wiped out. This blog/commenters has often said that the illegal foreign investors have forced the prices up at the margin, making much of how the marginal buyer sets the price.

    Let’s look at a 20% fall across the market and see how the recent buyers get screwed, including the young newly formed families.

    All us old farts who have paid our houses off will lose a bit at the margin when we downsize if we do it to free up some spending money as the changedown gap might be $0.04m less (if $1m sale falls to $0.8m and $0.8m buy falls to $0.64m so release falls from $0.2m to $0.16m) but the young who had a $0.6m buy lose $0.12k as their value falls to $0.48k and probably wipes out all their equity and possibly causes banks to sell them up quickly if they have any sort of hiccup.

    The greedy young people who haven’t made much contribution yet and piss their money up against the wall with lifestyle (gap years, craft beers, concerts, overseas holidays, drugs, taxis) don’t want to wait their turn. They want the system to favour them now! and if it destroys the retirement and assets of those who have contributed most, tough luck, because Gen X and Y want it all now! And screw anybody who gets in their way, even if it is their parents generation who have worked all their lives and paid taxes at higher marginal rates than current earners pay.

    Thanks goodness their are still also many young people who still work extra jobs, scrimp and save money, live a simple lifestyle and buy their homes to secure their and their family’s future. A policy that screws them is far worse than the current situation.

    • You are correct that house prices will fall if NG is abolished. I think that your 20% estimate overcooks it – my take would be about 9-11% on average. Nonetheless, your point still stands.

      The rest of your comment is complete and utter garbage. “I’ve paid taxes, did the hard yards. Young people spend too much on coffee and craft beers”. etc etc.

      Besides the fact that young people work harder and save more than their parents did at the same age (yes it’s true, I know that’s hard to digest), they’re on track to be materially far worse off than their parents generation. No longer do younger generations have access to free health/education, affordable housing, like it once was. Too bad, because previous generations gave themselves structural tax breaks and created their wealth through restriction of new entrants into the housing market.

      They should just wait your turn you say? When you’re trying to work through a system that is designed to screw you over, little wonder young people are ready to throw their elders onto the scrap heap.

      My suggestion is to realise that the writing is on the wall, and that younger generations are beginning to revolt (and will succeed). No generation is immortal, and should eventually begin focusing on the legacy they leave behind. My worry for baby boomers is that they are so wrapped up in their material worth that they’ve ignored their legacy – and their history will be immediately erased as soon as they part. This whole intergenerational battle is a horrible lose/lose.

      • You totally ignored my last paragraph. I know plenty of young people who are working hard, putting their weekends in doing up houses they have bought and building value and who are doing the saving that you spoke of. Theywill most likely retire owning their own homes and having investments that they will realise over time to supplement their pensions when and if they become eligible for them.

        But a lot of whiing is done by people who have chosen to time the property market waiting for the what they thought was an inevitable fall because it was, to them, a bubble and in the mean time they have spent some/much of what they should have saved.

        For about 7 years I have been reading, initially elsewhere, all the comments by some in this blog about don’t buy now and how real estate was a bubble and how the crash was coming. They’ve been wrong for about 7 years. It is highly unlikely they will ever catch up, even if prices fall 20%.
        The whole system is geared to real growth, population growth, increasing apparent/real wealth as you age and to protecting asset values to protect the banking system and the confidence that lets markets work. It’s like “don’t fight the Fed”. Those who choose to fight the system mostly lose. A system where things are set up for you to be on top at 30 will never prevail because most of the voting population is much older than that and human nature being what it is the system will favour the majority which means you get better off until about 50 or 60 and decline for your last 20 or 30 years until you hit the safety net with only a family home left, and then it declines as you can’t live well and maintain it well and replace cars and furniture etc.
        Every so often there will be a decimation frm which many will never totally recover and which resets the system, but like timing the stock market, very few will do it successfully and even fewer will do it twice near the top and twice near the bottom.

      • Apologies, I misread your last paragraph as sarcasm. Point taken.

        Although you are correct to suggest that there are young people doing the right thing (saving/working hard etc), that doesnt take away from the fact that they’re going to be less well-off, compared to the same cohort of people in older generations. Effectively, for the same effort, the current cohort is getting less in return than they did previously.
        Grattan did some great work a while back about this very issue (Wealth of Generations was the name of the report). The poignant image is that of changes in home ownership:

      • Just don’t tell him about the next thought bubble: means testing homes for the aged pension. Might actually need to start wearing continence aids (if not already ;).

    • Boohoo. World’s smallest violin plays for you as I sob and ponder the error of my greed for enjoying a craft beer.

      Your argument can be reduced to maintenance of the status quo (unearned high asset prices) because upsetting the status quo is unfair to late entrants, ergo the unfair status quo should be maintained.

      Intellectually hollow to argue that high prices should stay high because of the tax policies that assisted to inflate them.

      • You obviously didn’t read the whole comment. The worked example shows that us old farts aren’t the ones who will get screwed by the probable outcomes of labor’s policy. Cry for the younger people who have bought in the last 12 months or so. Play your violin for them.

      • Are you saying such people should be somehow protected/compensated? Or that they should be a case study of action-consequence. Clearly my pref is the latter.

      • I don’t have much sympathy for recent entrants. I’m 27 and everyone I know my age has had help from mum and dad. By buying into the bubble they are sustaining it. If the bubble collapses they can declare bankruptcy, save a deposit for 3 years and then buy, probably at a more reasonable price anyway, and will have a smaller mortgage then 3 years of loan repayments on their 30 year loan. They may have trouble taking out a mortgage though…

  6. This: “It is a double hit for the young with many being priced out of the home owning market in part because of the very tax concessions they are mostly missing out on.”

    If there’s a single sentence which sums up the whole faeces-filled enchilada, it’s this one….

  7. How about family trusts? And pensions for people with million dollar houses?

    I wonder how much of those benefits go to people under 30…

  8. Just the talk of removing NG is exposing a lot of people. I am tired of the scomo bullshit talk of mum and dad investors.

    As simple as that, if NG is removed, our boomers and intellectuals are worried about increased rents and lower property prices. Increased rents and lower property prices means more return on investment which should be good for rent-seekers. Why are you scared guys, whats cooking up?

    Free the market and let the market decide the pricing. Enough skewing done…

  9. Baby boomer and Gen X want it all: own home outright, super, multiple properties to NG, pension, share portfolio, trust, term deposit, caravan, boat, and a brand new 4wd. And they still cry poor. Yet Gen Y and those thereafter would be simply happy with there own home. Doesn’t take rocket science to see who’s being greedy here.

    • Those are mainly the things a middle socio-economic group of people who have worked and saved in a developed country can afford after 40 years of working and saving for their retirement. And of course 30 somethings who want to buy a house can’t afford them and a house as well. It’s a function of the priorities of the 30 year old homebuyer who has worked for 8 years and the accumulation of a lifetime’s savings and investments by a 60 year old who worked for about 40 years.

      • “And a house as well”
        I would suggest you read the comment again no where does it say Gen Y and thereafter expect a house AS WELL as those things. But who would expect you up there in fantasy land to know the reality of the situation.

  10. My biggest gripe is that the current tax system makes it nearly impossible for the young to save and start their own productive business without help from mum & dad.
    Yes it is possible, but the tax system should be geared to encourage this even by simply a lower cost of living to allow people to save.

    Sadly though, the system works so that you buy a house and use the equity because houses always go up…. Ever tried to go to the bank for a business loan without property behind you? It wont matter how sound your business plan is.

  11. Anyone who defend this and suggest the young will eventually get the “same” level of benefits when they get old do not even care such generous “welfare” is simply not financially sustainable. Aging population guarantees that there will be less working population supporting the retired ones. Therefore, there is simply not enough tax in the future to provide the same level of benefits.

    So who is greedy now?

    • Which is why I say the Labor policy doesn’t go far enough. CGT discount should be scrapped altogether and grand father clause REMOVED.

  12. young are only temporarily screwed
    time is working for them, in not so distant future they will be able to buy cheap homes and charge old BBs loads of cash for basic services they are going to need.