ALP Stands Firm on Negative Gearing

Labor will take its policy to slash negative gearing tax breaks to the next election, with shadow treasurer Chris Bowen yesterday describing the Federal Government’s attacks on the policy as “fundamentally dishonest”.

Mr Bowen said the ALP stood by its policy of restricting negative gearing — a tax break allowing property investors to offset losses from rental property against their income — to new homes, as well as halving the discount on capital gains tax for new properties.

His comments came after Treasury released documents it gave to the Government two years ago, amid a heated political battle over the impact of the Labor policy on housing prices.

The documents were the subject of a two-year freedom of information battle by the ABC.

The Treasury advice said Labor’s policy to end negative gearing for new purchases on established housing would add up to $3.9 billion a year to government revenue when it flowed through the system.

Halving the capital gains benefit would eventually add about $2 billion to Treasury’s books.

The policy would only push housing prices down by a “relatively modest” amount in the long term, according to the advice, because it would increase taxation on rental income. It also found the benefits from negative gearing tax breaks flow overwhelmingly to the top 20 per cent of income earners, who take more than half the total tax benefits of the scheme. Mr Bowen said the release of the Treasury briefing notes showed the Government had been running a dishonest scare campaign.

“The Prime Minister and the Treasurer talked about a sledgehammer on house prices, a housing crash and a sledgehammer impact on the economy,” he said.

“Now we knew that that scare campaign was shrill and we now know beyond a doubt that it was fundamentally dishonest. We have the most generous property tax concessions in the world.

“We provide more taxpayer support for somebody buying their fifth, sixth or seventh property than somebody buying their first.”

Acting Treasurer Kelly O’Dwyer said the documents confirmed what the Government had been saying.

“Labor should come out and finally admit that their goal is to reduce the wealth of millions of Australians,” she said.