National Australia Bank executive Gavin Slater is the latest member to debunk Malcolm Turnbull's scare campaign on Labor's negative gearing reforms.
Mr Slater noted that the bank does not anticipate a material impact on its business from Labor’s important reforms to negative gearing because:
“(Australia is) going through a very low period of interest rates, from an affordability
and investor point of view in a relative sense, compared to if it is high interest rates.
It makes investor properties a little bit more affordable.”
Australian Financial Review, 18 May 2016, page 29
Australia's home ownership rate is now the lowest it has been since the 1950s.
With 93 per cent of housing investment loans going to existing properties, the current policy settings are clearly failing to boost new housing supply.
For millions of young Australians, the dream of owning their own home is slipping further out of reach.
National Australia Bank has joined a number of experts and organisations who have called for reform to negative gearing, or have discredited the Turnbull Government's scare campaign.
These include the Henry Tax Review, Reserve Bank of Australia, Financial System Inquiry, Grattan Institute, Jeff Kennett, Saul Eslake, Jillian Broadbent, Warwick McKibben, Pitcher Partners, Perpetual, the Australian Council of Social Service, National Shelter and John Symond (in 2013).
It is now very clear that the Liberals have no plan for housing affordability.
Mr Turnbull is basing his government’s not-at-all-scary scare campaign on dodgy reports commissioned by vested interests. He is seriously out of touch yet again.
WEDNESDAY, 18 MAY 2016
APPENDIX – REFORMING NEGATIVE GEARING: THOSE IN FAVOUR
Described negative gearing and the CGT discount as a
“sheltering haven” that is “skewing national investment away from wealth-creating pursuits, towards housing”, and has caused a “property bubble” – see page 9
“Australia’s rules on negative gearing are very generous compared to many other countries” – see page 10
“The normal deductibility principles do not apply to negatively geared real estate such that the taxpayer is not obliged to demonstrate that the negatively geared property will generate positive cash flow at some point in the distant future” – see page 10
Taxation Reform in Australia: Some Alternatives and Indicative Costings – 2005 – link to paper here
Turnbull called negative gearing “tax avoidance”
“PAYE and other “unincorporated” taxpayers, however, have limited scope for tax avoidance, even of the most elementary kind, other than negative gearing where investments (more often residential real estate) is acquired with borrowed money and the excess of interest over rental income can be offset against other earned income”
Sustaining Prosperity Conference 2005, The Way Ahead – LINK
Turnbull says negative gearing and CGT is “generous”
“Negative gearing is a slightly different issue. Australia's rules on negative gearing are very generous compared to many other countries.
Indeed the normal deductibility principles do not apply to negatively geared real estate such that the taxpayer is not obliged to demonstrate that the negatively geared property will generate positive cash flow at some point in the distant future.”
Tax Reform in Australia: Why we need it, how we pay for it. Queensland University of Technology Brisbane 20th of October 2005 – LINK
“Comparing these trends with Australia it is clear there are similarities and differences. We have certainly favoured some kinds of savings with concessional treatment of superannuation, although the most preferred savings are probably the family home which is CGT free and investment real estate which benefits both from very generous negative gearing and the concessional rate of CGT.”
Global Trends in Tax Reform – 15 December 2005
It’s about “excesses”
KOCH: No, no, what about you? Are you looking at negative gearing tax reform?
TREASURER: We’ll consider these issues but I have always…
KOCH: So, yes you are or not?
TREASURER: I have always been very clear that negative gearing…
KOCH: You are or not? Yes or no?
TREASURER:…is a viable saving vehicle for ordinary Australians and I want to make sure that...
KOCH: But does it go too far? Does it need to be reformed?
TREASURER: There are excesses.
Sunrise – 18 February 2016
“If there are inadequacies in that system, if there are areas where the system is being abused or if there are areas in the system where they are excessive and there is a way to channel that sort of high-end investment into other areas, well, of course, the government would look at those things. Why wouldn't the government look at those things?
QT – 10 February 2016
MITCHELL: But you are planning changes of some sort.
TREASURER: “Look there are some excesses in this area as there are in other areas where people have multiple, where it is quite an operation, let’s put it that way, the way that negative gearing is used in some quarters.”
3AW – 19 February 2016
OTHER COALITION MPS
STEVEN CIOBO: “Well, there’s possibly scope to make some reform to negative gearing.”
Sky News – 15 February 2016
ALEX HAWKE: “There’s an argument that says if you have too many properties negatively geared that isn’t something that we ought to continue in the tax concession code. There’s also other ways of restricting what people would regard as too much of a concession to people.”
AM Agenda – 15 February 2016
EWEN JONES: I think there's areas within negative gearing that I see that could be looked at…There are people who have 20 plus houses that are negatively geared. Is that what we envisaged when we bought in negative gearing, the 20 plus houses?
ABC AM – 26 February 2016
ANDREW BROAD: “You could work this out with a financial figure or you could work it out in premises numbers, but people should be able to buy their first house and then buy an investment property, but I do think it is slightly unreasonable that someone should be able to gain negative gearing benefits when they are on their third, fourth or fifth premises.”
Speech to Parliament – 23 February 2015
NATASHA GRIGGS: Well, one of the things, well what they want to look at is where there’s excesses so where you’ve got a number of, you know, significant number of properties, there’s been no number or no figure put on that but that’s one of the areas where they see that there’s excesses. You know, my portfolio, because they’re saying there’s 14 properties, it sounds very elaborate but as I said I don’t make any apology for investing in the Territory, my home, the place that I absolutory love and I think more people should put their money where their mouth is.
ABC 105.7 Darwin – 18 February 2016
SUPPORTERS OF NEGATIVE GEARING REFORM OUTSIDE THE LIBERAL PARTY
E4–3 The effect of the tax system on housing affordability
“Prices send a signal to direct resources within an economy. Resources are directed to where they are most valuable when price signals reflect real preferences and resource constraints rather than tax policy settings, which of themselves contain no information about the type or location of dwellings Australians want to live in. Where taxes add to the volatility of demand or restrict the supply of housing, they reduce the efficient operation of the housing market. The general efficiency principle of tax policy, involves minimising its impact on economic activity. Similarly, when the tax system affects housing prices it can also affect fairness, for example, if the tax system makes it difficult for disadvantaged groups to afford housing.
However, other public policy objectives are of relevance for the taxation of housing. The role of housing as a lifetime savings vehicle that provides security in retirement means the income from owner-occupied housing should not be taxed. However, the Review is proposing to tax rental properties in a way that is more consistent with other forms of investment, reducing biases in housing investment and savings portfolios. As a result, these different tax treatments will affect the cost of housing for renters compared to homeowners.”
Henry Review into Australia’s Future Tax System, 2009
“Any change which discourages negative gearing may be a good thing from an FS (“Financial System”) perspective”
This is what John Symonds said on ABC Q&A on 11 November 2013, well away from the partisan rancour of an election campaign:
TONY JONES: But, John, I’m going to bring you up because that question was about a different sort of - in fact tax relief that’s being given to investors?
JOHN SYMOND: Well, I’m getting to that. Absolutely. I come back to overhauling the tax system. Negative gearing wasn't designed for people who can afford to go and buy $1 million, $2 million, $3 million houses or apartments for negative gearing to offset the bulk of their interest payment off their tax. So negative gearing does need to be looked at in the tax system because I don't think it is fair at the moment. I think it leans very heavily to the high income earners and that needs to be brought into line, as is hundreds of other aspects of the tax system.
TONY JONES: Right. Let’s hear brief answers from our panel on this? Carol?
CAROL SCHWARTZ: Well, affordable housing is a huge issue globally and, however, negative gearing in this country, I believe, is an absolute political hot potato and no government is going to touch it.
TONY JONES: Yes, but should they?
JOHN SYMOND: Yes.
“…negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property."
Joe Hockey, former Treasurer, Hansard, 21 October 2015
“I'm very disappointed at the way in which my side of politics are arguing against what I think is an eminently supportable concept that's been put forward by the Labor Party in terms of negative gearing.”
Jeff Kennett, former Liberal Premier of Victoria, ABC TV Breakfast, 16 February 2016
“Negative gearing is a policy that ultimately reduces home ownership, costs the Commonwealth a lot of money in terms of foregone tax revenue and is very unfair in terms of who benefits and who doesn't. So, it was high time that it went and we're delighted to see that we may well get some action on this front.”
John Daley, Grattan Institute (7:30 Report, 15 February 2016
In relation to getting policies on the table: “Congratulations to the opposition for some detail and I do think it has the potential to help provide better outcomes for all Australians no matter which side of politics you’re interested in.”
Chris Richardson (ABC RN, 17 February 2016)
“Reducing the incentive to invest in existing properties should hopefully divert investment instead into growth- and employment-generating businesses… Restricting negative gearing only to new properties is a good idea as it should help restore some equilibrium in the housing market.”
Pitcher Partners (Media Release, 15 February 2016)
“Reform of capital gains tax and negative gearing is also essential: not only to raise revenue but also to stem the speculative investment in property that has raised house prices and lowered more productive investment.”
Cassandra Goldie, CEO ACOSS (Media Release, 16 February 2016)
"Negative gearing and CGT exemptions for investors have been a dead weight on the ability to create more housing affordability"
National Shelter, Executive Office, Adrian Pisarski (Media Release, 17 February 2016)
‘‘At some stage negative gearing has got to go, not necessarily for the tax reasons, but for the leverage it’s putting into the property market, which is dangerous to the whole [financial] system,’’
Mr Peter Morgan, Perpetual (AFR, 17 February 2016)
There are ‘‘..a disproportionate amount of individuals savings that go into housing sector’’.
Jillian Broadbent, former Reserve Bank of Australia Board Director (AFR, 17 February 2016)
‘‘The question is do you want to avoid the problem now or do you want to wait until the thing just bursts?’’
Warwick McKibbin, former Reserve Bank of Australia Board Director (AFR, 17 February 2016)
Under the heading “Major tax distortions”: “The tax treatment of investor housing, in particular, tends to encourage leveraged and speculative investment in housing.”
“Reducing these concessions would lead to a more efficient allocation of funding in the economy.”
Financial System Inquiry – Final Report (November 2014)