The likelihood of changes being made to Australia’s current negative gearing arrangements have been drastically reduced, with the Federal Government officially announcing it will not touch the tax break.
According to media reports from over the weekend, the Coalition has decided to take the negative gearing status quo to the upcoming election and has accused the Labor Party of being reckless in their approach to the issue.
“What Labor is proposing is a huge, reckless shock to the market. This is no fine tuning; this is a sledgehammer they are taking to the property market,” Prime Minister Malcolm Turnbull was quoted as saying by Fairfax Media outlets.
According to the Fiarfax report, Turnbull said the Coalition’s approach to negative gearing is “common sense” when compared to Labor’s proposal of quarantining negative gearing to new homes only from 1 July 2017.
The Coalition’s announcement has been welcomed by a number of property interest groups, many of which have been vocal opponents of the idea of any changes to negative gearing.
“Negative gearing promotes private investment in the residential rental market, stimulates economic activity and relieves pressure off social housing and ultimately the public purse,” HIA Chief Executive Industry Policy and Media Graham Wolfe said.
“Today’s announcement compliments the Government’s commitment earlier in the year to retain capital gains tax arrangements, facilitating ongoing access to residential property as a worthwhile retirement investment strategy
across all income earners,” Wolfe said.
Property Council of Australia chief executive Ken Morrison said the government’s decision would save investors from being by yet another tax increase.
“Australians already pay $72 billion a year in property taxes and we are seeing new pressures to increase taxes on property even further,” Morrison said.
“This is a good decision for the 2 million Australians who own an investment property and the 1.1 million Australians who are employed in the property industry. This decision is economically responsible and recognises the important role property is playing in Australia’s economic transition,” he said.
“Australians understand that owning a property is a way they can secure their financial future. Owning a property means financial security and independence – this is what we should be encouraging.”
Shadow Treasurer Chris Bowen hit back at the government, accusing the Coalition of jeopardising the ability of people to buy their own home in favour of subsidising investors.
"Today, we saw Malcolm Turnbull tell the Australian people that he couldn't care less about the great Australian dream of owning your first home," Bowen said.
"He thinks it's more important for an Australian buying their 10th or 11th property to get a tax break than it is for first-home buyers to get into the housing market."
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