Property and construction lobby groups have warned that changes to negative gearing or the GST would have severe impacts on housing affordability for both buyers and renters.


The Federal Government is currently undertaking a review of taxation in Australia before delivering the Federal Budget in May.


As part of that review, there has been speculation the government has considered both a change to current negative gearing arrangements and an increase to the current GST.


According to report by Sky News yesterday, Treasure Scott Morrison said the government needs to “look at all aspects of how the tax system works” in relation to negative gearing.


But Antonia Mercorella, chief executive officer of the Real Estate Institute of Queensland said any change to negative gearing would have a flow on effect to housing affordability.


“Removing negative gearing from property investment will only serve to drive investors to other assets such as shares, where the offset would remain intact,” Mercorella said.


“This would further impact affordability as there would be fewer houses available to meet rental demand,” she said.


While changes to the current arrangement may benefit the Federal Government, states such as Queensland would suffer as their public housing system would come under increased strain.


“In Queensland more than a third of our population is in rental accommodation, so it’s crucial that supply is maintained for this large section of the community,” Mercorella said.


“If private rentals were drastically reduced this would place enormous strain on the limited resources in public housing.”


While there could be changes to negative gearing down the path, it now seems unlikely the GST will be increased, which is welcome news to the Housing Industry Association (HIA).


“The Prime Minister has rightly questioned whether raising the GST to reform taxation elsewhere will provide net positive benefits to the economy. Increasing the GST on new housing will cost jobs and reduce housing affordability, putting both firmly on the negative side of the ledger,” HIA chief executive industry policy and media Graham Wolfe said.


 “Modelling conducted by the housing industry shows that an increase in the GST by another 5% would add around $30,000 to the price of an indicative house and land package, and over $60,000 over the life of a loan in principal and interest repayments,” Wolfe said.


Wolfe claims taxes already account for 44% of the final price of a new house and land package in Australia.