Liberals split on negative gearing tax policy

Scott Morrison played down talk of rifts between state and federal Liberal governments over negative gearing policy.

NSW Planning Minister Rob Stokes. Picture: Justin Lloyd

Scott Morrison has played down the appearance of rifts between the state and federal Liberal governments over negative gearing policy, instead commending NSW for pursuing reforms to free up supply to improve housing affordability.

The Treasurer tried to defuse calls today from NSW Liberal Planning Minister Rob Stokes for the Turnbull government to review its stand on negative gearing as part of a push aimed at assisting more Australians into home-ownership rather than favouring investors with million-dollar policies.

But Mr Morrison said the Australian Prudential Regulation Authority had already taken measures to “curb the growth in investor credit for housing” with the Reserve Bank acknowledging this had taken a lot of heat out of the investor market.

“What I’m not sure Mr Stokes is aware of is the impact of the measures from APRA,” Mr Morrison said. “The Reserve Bank Governor, both of them, former current, have acknowledged that the measures put in place by APRA, which were designed to take the heat out of the investor market, have had significant impact.”

“The rate of growth in investor loans in this country for real estate fell by more than half as a result of what APRA did. Now, you’ve got to get the balance very careful on these issues.”

Mr Morrison said there was no single solution to solve the problems in the housing market, warning that a policy which worked in Sydney may actually make things worse in Tasmania.

“I welcome the debate with the states and territories,” he said. “I welcome the suggestions. I think we have to work through them collectively.”

Mr Morrison said he would be receiving a report on affordable housing financing options next Friday at a meeting of state treasurers. He also praised the NSW government for its pursuit of supply side reforms.

“The NSW government, I think, is actually leading the way when it comes to the supply side reforms that are necessary and particularly in the innovative way that they are addressing social housing needs in this state, and I comment them for it,” he said.

“And I think they provide a good guide on the road ahead and the sort of initiatives that, as a Commonwealth government, we want to support. So we’re all in this together.”

Earlier, Malcolm Turnbull said the Coalition has no plans to change negative gearing rules despite NSW Planning Minister Rob Stokes calling today on the federal government to review its position to help make home ownership more affordable.

Speaking on 3AW radio in Melbourne, the Prime Minister said the main problem pushing up house prices was a lack of supply and argued for the construction of more dwellings.

Prime Minister Malcolm Turnbull.

“We haven’t got any plans to review the policy we took to the election on that,” Mr Turnbull said. “Can I just say to you that the issue of housing supply and housing affordability is overwhelmingly a question of supply.”

“What we need to do and we are working with state governments now to do that is to zone for more density, for more housing, for more affordable housing. The critical thing is to build more dwellings.”

Mr Turnbull also told 3AW that he disagreed with the move by Fremantle Council to move Australia day to January 28 and make it more “culturally inclusive”.

The Council voted in August in favour of moving the day out of sensitivity to indigenous Australians who believe that January 26 is “invasion day.”

Mr Turnbull said there was “obviously controversy” about Australia day, but said it was best to stand by the current arrangements.

“Let’s stick with Australia day on the 26th,” he said.

Finance Minister Mathias Cormann issued a put down to Mr Stokes on Sky News earlier this morning, urging him to focus on what he could achieve as NSW Planning Minister to improve housing affordability.

“Well, Rob Stokes should focus on his responsibilities as the state planning minister in NSW where he in the driver’s seat to ensure that housing supply can be increased in the great state of NSW to improve housing affordability,” Senator Cormann said.

“He is in the driver’s seat when it comes to improving planning regulations, zoning regulations, pursuing higher density housing, a greater diversity of housing options. I mean, the states, really, when it comes to increasing the supply of housing, are very much in the driver’s seat.”

“The Commonwealth is always very keen to work with them but the suggestion that somehow increasing taxes and making rental accommodation less affordable is the right way to go, we completely reject.”

“We made very emphatic commitments in this regard to the Australian people before the last election and we completely stand by those commitments.”

Earlier this morning, Minister for Revenue and Financial Services Kelly O’Dwyer defended negative gearing as providing assistance for everyday families.

She told the Nine Network that “a lot of average mums and dads” relied on negative gearing to “actually have a foot in the property market.”

Minister for Revenue Kelly O'Dwyer.

“The federal government is working “hand-in-glove” with states and territories to help young families crack the housing market … The Labor Party wants to pretend this is a simplistic solution to fixing the housing affordability problem.”

“Unfortunately it isn’t. It’s got a lot to do with supply and demand.”

Labor frontbencher Anthony Albanese said overhauling negative gearing, a key Labor policy, was crucial to fixing the affordability crisis.

“We’re in danger of developing a society whereby some people are able to buy their sixth, seventh, eight home but people trying to get into the housing market to buy their first home simply aren’t able to,” he said.

Liberals split on housing tax policy

The Turnbull government is facing a new row over housing tax breaks as a key Liberal state minister urges a shift in policy on negative gearing, warning the “dream of home ownership” is being dashed by a flawed tax system.

NSW Planning Minister Rob Stokes will challenge Scott Morrison to review his stand on negative gearing in order to develop new policies that help Australians who want to own their home rather than favouring investors with million-dollar properties.

The call for change will reignite debate over housing taxes after a bruising federal election campaign where Malcolm Turnbull and Mr Morrison ruled out changes to negative gearing in the face of a Labor campaign that blasted the “unfair” concessions for property investors.

Mr Stokes will use a speech in Sydney today to attack negative gearing, saying the federal government needs to overhaul tax policy to focus on encouraging equality of opportunity of home ownership.

“We should not be content to live in a society where it’s easy for one person to reduce their taxable contribution to schools, hospitals and other critical government ­services — through generous federal tax exemptions and the ownership of multiple properties — while a generation of working Australians find it increasingly difficult to buy one property to call home,” Mr Stokes will tell a Committee for the Economic Development of Australia event.

The remarks are a direct challenge to Mr Turnbull and Mr Morrison, the federal government’s most senior cabinet ministers from NSW, at a time Labor is promising to raise $32.1 billion over a decade by scaling back tax deductions and capital gains concessions on property investments.

Bill Shorten and opposition Treasury spokesman Chris Bowen have kept the plan as a key Labor policy despite its election loss, confident that it appeals to younger Australians and can be updated for the next election as a way to rally voters against the ­Coalition.

Mr Stokes, a former university law lecturer and author of environmental planning articles, backs his case by citing a Reserve Bank recommendation that negative gearing should be reviewed and that “policy should not unduly advantage property investors at the expense of prospective owner occupiers”.

The NSW minister will warn “the dream of home ownership is becoming harder and harder to obtain” for Australians without parental support.

“Surely the focus of the tax system should be directed towards the type of housing we need,” he says.

“Why should you get a tax ­deduction on the ownership of a multi-million dollar holiday home that does nothing to improve supply where it’s needed?

“We should promote investment in the type of housing that is needed by the burgeoning populations in cities like Sydney.”

Mr Stokes will say that the NSW government is doing everything it can to ­increase housing supply.

Last week he announced that over the next five years, 185,000 new homes were expected to be built, with more than 65,000 housing starts in the year to March, and a $20 billion pipeline of housing projects under way.

“It’s time for a real debate about the policies, outside of supply, that governments all levels can do to help provide greater opportunity for people buy homes,’’ he said.

Mr Stokes’ speech is a reply to Mr Morrison’s speech on housing affordability last month, when he called on the states to increase housing supply.

Mr Morrison later praised a suggestion by NSW Finance Minister Dominic Perrottet that reducing stamp duties and ­replacing them with a broadbased land tax would help free up a property market in which retirees stay in too-large homes while families struggle to buy.

Mr Stokes also appears to ­regret the Abbott government’s curtailing of Labor’s National Rental Affordability Scheme, after evidence emerged it was being exploited by universities to build accommodation for foreign students.

He will point out a US ­tax credit scheme for affordable housing has delivered millions of new affordable rental ­dwellings.