Housing investment tax changes on cards ahead of May budget

CHANGES to negative gearing rules and capital gains tax are being considered by the Turnbull Government ahead of the May budget.

Changes to negative gearing rules and capital gains tax are being considered by the Turnbull Government as part of a housing package to be announced in the May budget. Picture: Kym Smith

CHANGES to negative gearing rules and capital gains tax are being considered by the Turnbull Government as part of a housing package to be announced in the May budget.

Turnbull Government ministers have repeatedly ruled out changes to either of the housing investment tax measures, which Labor championed in the lead up to the last Federal Election.

But The Australian reports the government is not ruling out some changes to negative gearing or capital gains tax in its talks with property, housing and community groups ahead of the May budget.

Treasurer Scott Morrison did not rule out making any changes to negative gearing in a radio interview this morning but said Labor’s claims scrapping the measure could solve the housing affordability crisis were “ridiculous”.

“Last time Paul Keating did that rents in Sydney went through the roof,” Mr Morrison told 2GB.

The Treasurer said the government’s housing package would be about tackling affordability but would not be drawn on what changes would be made in the budget.

Mr Morrison said the aim was to remove pressure from the market.

“You’ve got to put downward pressure on the increase in prices and the most important way you do that is you free up supply,” he said.

“There’s work for the state governments to do, there’s work for the local governments to do but also the federal government, and you’ve gotta deal with the supply issues.

“I keep a close on the demand issues as well, the issues around investor loans and we’ve seen that go up recently.”

The Australian reports among the measures being considered are a limit on the number of properties a single investor can negatively gear, or a cap on the total size of interest deduction one taxpayer can claim.

The change was discussed ahead of last year’s budget and targets only the most aggressive users of negative gearing.

While property and housing groups are strongly opposed to any change in negative gearing, they have indicated privately they could support the move.

Another option being looked at would be dropping the discount of capital gains for tax purposes from 50 per cent to 40 per cent, which was recommended in a 2010 tax review.

It’s expected the housing package will also include changes to the National Affordable Housing Agreement.

Treasurer Scott Morrison has been critical of the current arrangement, launched by the Rudd Government to boost housing supply.

The agreement provides $1.3 billion a year to state governments to support low-cost housing but the supply of housing has fallen while it has been in place.