Federal election 2016: Home ownership an election issue as Government takes reform off table

AS surely as the Prime Minister’s surplus locks were hitting the deck yesterday, his government has made negative gearing reforms off-limits in the Budget.

THE Turnbull government has officially placed negative gearing reforms off-limits in the Budget, which will make home ownership the key election battleground.

Prime Minister Malcolm Turnbull will announce the Budget policy today in response to Labor proposals to remove negative gearing on existing properties from 2017.

Warning a Labor election victory would drive up rents and reduce home values, Mr Turnbull said families face a clear choice at the election.

“Driving down the value of most Australians’ most ­important asset, their home, is hardly a strategy for economic growth and more and better jobs,’’ he said.

“Labor’s housing tax plan will drive up rents and reduce the number of homes available for tenants.

“What a reckless trifecta — lower home values, higher rents, less investment.”

He said not only would the rich be hit by Labor’s proposed reforms, but also ordinary workers such as nurses, teachers and defence force personnel, many of whom have investment properties.

“Labor is taking a sledgehammer to the ambitions of regular mums and dads who want to invest, whether it’s established houses and apartments, commercial property, shares in listed companies, or shares in their own business,’’ Mr Turnbull said.

Prime Minister Malcolm Turnbull gets a trim at his barber this morning. Picture: Twitter/Sam Chadwick

Negative gearing allows workers to use their losses on investment properties when rent and costs, including the mortgage, are considered to reduce their taxable income.

Until now, Mr Turnbull and Treasurer Scott Morrison had not expressly ruled out reforms to negative gearing and were seriously considering a $20,000 negative gearing cap which would have targeted a relatively modest 100,000 taxpayers.

The backflip follows a backbench revolt that included an intervention from former prime minister Tony Abbott, who urged Mr Turnbull to rule out reforms.

Negative gearing: the facts.

There are also concerns the real estate market is ­already cooling in some states. Mr Morrison des-cribed Labor’s plan as a “housing tax’’ and warned it would also hit small business.

“Around three-quarters of those with net rental losses own just one property — they’re not property barons,’’ Mr Morrison said. “And the predominant occupations for those with rental losses are nurses, teachers, police and emergency services workers, but above all they are mum and dad investors.’’

Labor leader Bill Shorten has described Mr Turnbull’s criticism as “desperate stuff’’ and a scare campaign, pointing out senior economists have backed his proposal.

But other economists have warned it is likely to distort the housing market during implementation because ­investors would surge into the market to beat the ban.

Mr Shorten wants to ban negative gearing for existing properties from 2017, a move Labor argues would force ­investors into new homes, boosting supply and construction jobs. Investors who already negatively gear homes would not be affected.

HOUSE HUNTERS WHO WANT TO MOVE UP A GEAR

LAUREN Anderson and Amanda Lawrence are house-hunting for their first property, but are already considering investing in a second one.

As long as there are no changes to existing negative gearing rules.

Lauren Anderson and Amanda Lawence also looked for properties in Sydney’s east. Picture: Braden Fastier

“Negative gearing is good to bring your taxable income down, and that would be a good thing for us. It makes it more appealing to invest and easier to invest sooner,” Ms Anderson, 30, said yesterday.

“If there wasn’t negative gearing, it would probably just make it more costly. We would have to wait longer to invest.”

The pair were yesterday scouting properties in Sydney’s east, and are hoping to bid on one next week.