‘Wealthy property investors’ could create $20b blackhole in budget
“Deeply unfair” tax breaks are turbocharging inequality but also creating a $20 billion black hole at a time when Australia desperately needs money.
Money
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Tax concessions for property investors will cause a $20 billion a year headache for the government budget within a decade and will overwhelmingly benefit high income earners, new research has revealed.
The huge jump in the cost of the tax concessions is also playing out as interest rates skyrocket meaning the amount landlords can deduct for negatively geared properties will continue to increase.
Modelling by the independent Parliamentary Budget Office (PBO) – commissioned by Greens leader Adam Bandt — has estimated that with interest rates currently at 2.85 per cent, this would see negative gearing drain $12.7 billion from budget revenue in 2023-33.
However, if interest rates were to hit 3.35 per cent — something the Reserve Bank of Australia’s has tipped — that cost would blow out further to $13.8 billion.
Negative gearing cost the budget just $3.8 billion last year.
The figures get even worse for revenue combined from negative gearing and capital gains tax concessions, which totalled just $8.5 billion in 2021-22.
Yet, the amount of missing revenue from both measures over the next decade will hit $157 billion, including $97 billion from negative gearing as interest rates rise and $60 billion from capital gains tax discounts.
Analysis from last year also revealed that 56 per cent of the value of the two tax concessions will go to the top 10 per cent of income earners – those earning more than $1189,000 a year, while 36 per cent of those earning over $129,200 receive negative gearing benefits.
This means the average property investor can claim about $4640 in tax concessions by the end of the decade.
Max Chandler-Mather, Greens housing spokesman, said the two tax concessions were unfairly benefiting higher income earners and should be scrapped.
“The higher interest rates go, the more negative gearing will cost the budget, which means right at the time when the government needs extra revenue to help alleviate the cost-of-living crisis they are instead handing it over in the form of tax concessions to wealthy property investors,” he said.
“Negative gearing and capital gains tax discounts work together to artificially inflate house prices, and turbocharge inequality, funnelling tens of billions of dollars into the pockets of the top 10 per cent of income earners in Australia.
“These tax concessions alone mean it is often easier for a property investor to buy their fifth house, rather than someone to buy their first home, and that’s deeply unfair.”
Yet, the bottom 50 per cent of income earners — those on less than $51,500 per year — accounted for less than 4 per cent of revenue lost to the capital gains tax discount.
It also accounted less than 16 per cent of negative gearing benefits, the analysis also found.
However, lost revenue of $20.4 billion, would see $11.4 billion flow to those earning more than $189,000 a year.
Originally published as ‘Wealthy property investors’ could create $20b blackhole in budget
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