Teals back tax reform despite backlash risk on negative gearing

Independent MPs are pressing for tax changes to help young Australians who feel shut out of the housing market, naming negative gearing as a key issue even though voters in their electorates take advantage of the tax breaks.

The “teal” independents and other crossbench MPs have called for negative gearing to be on the agenda in a total rethink of tax and housing policy, as federal officials consider ways to change the rules on investment properties.

Independent MPs Allegra Spender, Zali Steggall, Sophie Scamps, Zoe Daniel and Monique Ryan all back tax reform, including changes to negative gearing.Credit: Alex Ellinghausen

The calls come after Prime Minister Anthony Albanese said he was not considering taking changes to negative gearing and capital gains tax to the next election, although some Labor MPs have gone public with their support for reform.

While the crossbench MPs have not adopted a unified position on negative gearing, several declared that they wanted “everything on the table” in stronger policy action on tax and housing.

“It is encouraging that the government is considering tax in its reflections on housing – it is too big a lever to ignore. But this is more than just negative gearing,” said Allegra Spender, who holds the seat of Wentworth in the eastern suburbs of Sydney.

“We need to lower income taxes on younger working people and tilt the balance towards home ownership for those who are locked out.

“I’ve been arguing for a broad approach to tax reform with everything on the table, and I hope that’s what we’re starting to see.”

There were 6800 taxpayers in Wentworth who claimed a net rental loss in 2022, or about 7.6 per cent of all taxpayers in the electorate, according to an analysis from the Parliamentary Library that was released on Wednesday after being commissioned by independent senator David Pocock.

The support for reform is not limited to the teal MPs, with Tasmanian independent Andrew Wilkie also saying he was in favour of scaling back negative gearing.

Independent MP Zoe Daniel, who represents Goldstein in Melbourne, said she had been calling for an “everything on the table” independent review of tax since before she was elected.

“Negative gearing is just one piece of this. We’re going to have to think much bigger to fix the housing crisis,” she said.

“I will say that any change to property tax settings also needs to be carefully considered to avoid making the rental supply situation worse.”

About 8200 taxpayers in Goldstein, or about 8.1 per cent of taxpayers living in the electorate, claimed a net rental loss. The Parliamentary Library analysis is based on Australian Taxation Office results from 2022 according to the residence of the taxpayers, not the location of their investment properties.

The member for Kooyong in Melbourne, Monique Ryan, said a generation of Australians was losing hope in owning a home. Kooyong had just over 10,000 taxpayers with net rental losses, or 9.1 per cent.

“Every policy lever needs to be pulled,” Ryan said.

“Tax changes alone are not a magic bullet for the housing affordability crisis.”

While Ryan did not name negative gearing as a target for reform, fellow independent Zali Steggall, the member for Warringah in northern Sydney, mentioned it and said “all levers” needed to be explored.

“While I’m open to reviewing how negative gearing is applied, I recognise we can’t abruptly change policies that people have relied on for years,” she said.

Warringah had about 7000 taxpayers claiming a net rental loss, or 6.9 per cent.

Sophie Scamps, the MP for Mackellar on Sydney’s northern beaches, said a recent forum with voters in her electorate had revealed support for tax changes.

“The most popular solution, with almost unanimous support, was for a paring back of the tax rules that give real estate investors an unfair advantage over first home buyers,” she said.

There were 6300 taxpayers in Mackellar with net rental losses, or 6.3 per cent.

Pocock, who represents the ACT in the Senate, has put forward a reform that scales back some of the capital gains tax and negative gearing concessions to save $16 billion over a decade. The three Canberra electorates have 24,000 taxpayers with net rental losses combined, some of the highest rates of negative gearing in the country.

Rebekha Sharkie, who holds the former Liberal seat of Mayo in South Australia, warned against changes to negative gearing and noted that Labor had promised to keep the rules in place.

“Firstly, there may be unintended consequences such as reducing the pool of rental properties available,” she said.

“Secondly, such changes would overwhelmingly impact mum and dad investors who may have one or two investment properties as part of their retirement planning.”

But regional Victorian independent Helen Haines, who holds the seat of Indi, said it was imperative that “no levers are out of bounds” when the housing challenges were so great.

“The Australian people deserve a debate, not a scare campaign,” she said.

Negative gearing allows taxpayers to claim deductions on their income tax for the expenses involved in owning investment properties. They can also benefit from a tax concession on the capital gains tax they would owe upon selling the property.

About 1.1 million people, or half the total number of people with rental deductions, had a rental loss during the year. These losses added up to $7.8 billion and provided a tax benefit of $2.7 billion to those taxpayers.

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