The Turnbull Government’s defence of Australia’s property tax lurks has been dealt another blow, with the head of ME Bank arguing that Australia’s tax rules favouring property investors – negative gearing and the capital gains tax (CGT) discount – are widening the gap between young and old, and is calling for them to be curbed. From The Age:
ME’s survey data… shows the “financial comfort” of people aged over 50 has risen significantly in the last five years; a period of cheap debt which has helped drive a house price surge.
The bank’s same measure of financial comfort has shown a much smaller improvement for members of Generation Y (aged 18 to 34) and Generation X (aged 35 to 49).
[CEO Jamie] McPhee argued the inability of many young people to buy property was probably a key reason for the widening generational gap…
“I think what we’re seeing here is that the younger demographic is obviously having problems with getting into home ownership, and that’s playing out in a significant flatlining of financial comfort,” Mr McPhee said in an interview.
“Clearly, what we’ve got in this country . . . is a tax regime that favours the investor over and above the owner-occupier,” Mr McPhee said…
The bank’s survey of 1500 households also asked respondents if they would support the government providing “less support to investment property buyers through tax reform”…
“Why should the tax incentive be for investors, not owner-occupiers? Clearly, we’re seeing that it is creating less financial comfort for the younger generation, and we know that the majority of Australians are supportive of it being a more equal arrangement,” Mr McPhee.
“I think there’s an imbalance and I think what should happen is the imbalance should be addressed,” he said.
Below is the chart showing that property investors are crowding-out first home buyers. Note the almost perfect inverse correlation between the two groups:
But don’t expect the Turnbull Government to listen. It has continued its scare campaign warning that Labor’s proposed reforms to negative gearing and the CGT discount would harm both families and the economy. Here’s Finance Minister Mathias Cormann on ABC’s 7.30 Report last night:
Labor wants to tax more and to tax badly. They want to increase tax on investment by increasing capital gains tax. They want to hit families and the economy by making ill-thought-out changes to negative gearing which would lower the value of property, which will drive up the cost of [rents]…
Now compare this to Labor’s Shadow Treasurer, Chris Bowen, who said the following about its policy on ABC’s Lateline last night:
[Our’s] is a policy which improves housing affordability, which puts first home buyers on a more level playing field with investors, provides a significant boost to the budget bottom line…
If you are a younger Australian, you would be nuts to vote for the Turnbull Government, which clearly wants to not only rob you of more affordable housing, but also drive-up the cost of your education as well.
