Family homes should be safe from a Jim Chalmers budget tax attack

Your family home is a huge potential tax revenue target for Treasurer Jim Chalmers. But he will leave it alone next week for several reasons.

There has been some nervousness among Australians – especially those with large real estate or superannuation holdings – about next Tuesday’s federal budget.

Following the Labor Government’s new plan to double tax on $3 million-plus super balances announced in February, some are worried about what large assets may be targeted next.

For most Australians, their house is their biggest asset. And also their biggest tax dodge.

The capital gains tax exemption for family homes, so we pay nothing on the profits when we sell, will cost the federal budget an estimated $48 billion this financial year.

It’s the most expensive tax break the government offers, and some accountants say Treasurer Jim Chalmers might use the budget to tweak it at the high end of home sales – perhaps those above $2 million.

Dr Chalmers refused to rule this out touching the family home’s tax-free status a few months ago, but his boss Anthony Albanese almost immediately declared his government would not impact people’s homes.

Australians enjoy a huge tax break when they sell their family home. Picture: iStock

I must confess I watch with envy when I read about sales of luxury houses, such as waterfront Sydney or Perth mansions that were bought for $5 million not so long ago and now fetch $10 million-plus.

That is one huge tax-free capital gain, and it feels a little like some sort of sick game for the super-rich that the rest of us can never be part of: keep bidding up the prices of each other’s mansions and share in the massive tax dodge.

Slapping extra taxes on those best able to afford them, such as wealthy property owners, without affecting the vast majority of taxpayers, may seem like a sensible political strategy.

However, there are several reasons why people’s main residences look safe from budget tax meddling.

Firstly, our PM is not going to go back on his promise and attack Australians’ most sacred of assets – their home. And he said as much.

The storm started by the recent super tax change – despite it only impacting 2 per cent of people this decade and potentially 10 per cent of retirees 30 years from now – shows that people do not like governments fiddling with their assets in this way.

And we are all aspirational. While we may not own a $4 million home now, we’d like to think we will one day and don’t want money-grabbing governments taking a slice of it.

Secondly, changing tax rules around housing messes up the system. When Labor abolished negative gearing in 1985, it was forced to reintroduce it in 1987 after huge rent increases and housing market upheaval.

Right now, as huge rent increases across Australia hit tenants hard, no government will want to change a system that’s already under so much pressure.

Finally, there are politically easier ways to rein in government costs – such as altering next year’s stage three tax cuts for middle and high income earners, or reducing spending on the NDIS or other programs. However, these would lead to more accusations of broken promises. Who’d want to be a treasurer?