In a move reminiscent of 2019, both Jim Chalmers and Anthony Albanese confirmed on Wednesday that Treasury officials are working on options to scale back negative gearing and capital gains tax, with the Treasurer insisting the review is “not unusual”.
“Treasury looks at all kinds of Treasury options all of the time. It is not unusual for the public service and, in my case, my department … to examine issues that are being speculated about in the public or in the Parliament. That is how a good public service operates,” Chalmers said.
He stressed that, while the review isn’t part of the government’s current housing agenda, he wouldn’t dismiss the possibility of it being included down the line.
Prime Minister Anthony Albanese, however, downplayed reports that the government commissioned Treasury modelling on changes to negative gearing and capital gains tax, stating he values Treasury’s advice and supports it exploring a range of policy ideas.
But while he scoffed at a question about negative gearing in an ABC interview just last week, speaking to the ABC Radio on Wednesday, the PM said: “The department, like all departments, looks at various things at various times.”
“That’s what Treasury do. We respect the public service. Lots of people look at lots of things, but it’s certainly not our policy,” the PM added.
Although he denied being the one who requested Treasury to explore potential changes, he stated that he is unaware if Treasurer Chalmers did so.
“I don’t know because I’m not the Treasurer. And the Treasurer is on his way to China as we speak,” the PM said.
“What we have done is to concentrate on our Homes for Australia plan. What I can say is, at no level of the government has there been a debate about anything other than getting our Homes for Australia plan through. And those meetings include, obviously, in our Cabinet, and those processes include, obviously, the Treasurer and other Ministers as well. What we’re concentrating on is delivering the Homes for Australia plan, some of which is caught up in the Senate, because we know that the key to housing policy is lifting supply, and that has been our concentration.”
Meanwhile shadow treasurer, Angus Taylor, is convinced Labor is “hard at it”, confirming on Wednesday that there are no circumstances under which the Coalition would support any reforms to negative gearing.
“We don’t support a tax on housing that will reduce the supply of housing and increase the cost of housing. In a cost-of-living crisis, the idea that a tax on housing is the way to solve a cost-of-living crisis where the biggest pain being felt by most Australian households is the cost of housing, is just extraordinary. Only this Treasurer and this Prime Minister could think that is the answer to this problem,” Taylor said.
The debate over negative gearing seems to resurface every three years in the run-up to elections, with many attributing Bill Shorten’s loss in the 2019 federal election to the policy’s unpopularity.
In February, Treasurer Jim Chalmers firmly stated that the government was not considering any changes to negative gearing. Fast forward to September, and it seems the government is now open to the possibility of adjustments, possibly spurred by mounting pressure from the Greens to tackle housing affordability.
Namely, two key elements of the government’s housing policy – a tax incentive for private developers to build rent-capped apartments and a subsidy scheme for first home buyers – are stalled in the Senate due to a lack of support from both the Greens and the Coalition, with the Greens demanding changes to negative gearing and capital gains tax in exchange for their backing.
Speaking to Sky News back in February, amid similar pressure from the Greens, Chalmers said regarding potential changes to negative gearing: “That’s not something that we’re proposing, not something that we are considering, not something that we are working up.”
At the same time, Taylor told ABC’s Insiders that the opposition is aware the government is contemplating changes to the policy.
AMP’s chief economist, Shane Oliver, previously argued that any changes to negative gearing could create distortions in the market, potentially exacerbating property affordability issues by reducing the supply of rental properties.
Capital gains, on the other hand, Oliver admitted, is potentially excessive and could use a revision.
“There is a case to consider removing the capital gains tax discount and return to the pre-1999 approach of adjusting capital gains for price inflation,” he said earlier this year.
Back in 2019, Labor proposed to halve the 50 per cent capital gains tax deduction and limit negative gearing to new properties only.
