iscover 
It has been reported that the Albanese government is modelling a two-property limit on the contentious tax deduction. Labor frontbencher Mark Butler has said that the party was “thinking about options” in terms of negative gearing changes.
Government sources have suggested that if reform were pursued, it may make sense to consider negative gearing and the capital gains tax (CGT) discount in tandem.
Such a package could form part of a federal budget initiative aimed at addressing what has been described as a generational housing divide.
However, speaking on the Broker Daily Uncut podcast, Finni brokers Eva Loisance and Costa Arvanitopoulos joined Broker Daily director Alex Whitlock to discuss whether changes would meaningfully boost housing supply or create unintended consequences.
“There’s no clear indication that anything will change yet,” Arvanitopoulos said.
“I guess the government is just throwing it out there just to see what sort of reaction they’re going to get. It’s the same sort of playbook that they did with CGT. Let’s throw it out there. Let’s see what the public is saying, what the media is saying.”
Supply concerns raised
Whitlock noted that changes to negative gearing could have a variety of knock-on consequences in a complex property market.
He noted that margins in the investment property market were already thin, and changing the system could damage the balance that many investors have spent time and money building.
“The government’s just looking through the wrong end of the telescope,” he said.
“The bottom line is anyone who’s an investor will know that it is brutally harsh trying to get any kind of return on investment property if you have debt on that property.
“If you’re trying to run an investment portfolio and provide much-needed accommodation for Australia’s renters, it is brutal trying to make the numbers stack up.
“You’re getting hammered with land tax, you’re getting hammered with all of the compliance. You’ve got interest rates that are fairly punitive. Then yields also get very quickly eroded through maintenance, property management fees and taxes.
“Then you’ve got the government mucking around with CGT and negative gearing.”
Whitlock warned that changes could impact what is already a tight rental market.
“You’ve got to look at providing housing for Australians, and you’ve got to look at the housing market, not around the taxation issues. You’re on a knife edge in terms of the balance of the property market here. We all know that not enough housing is created. There’s complex reasons why that is. Housing is unaffordable. You need a stable rental market,” he said.
Broker Daily has previously reported on warnings that scaling back the CGT discount could prompt a wave of investor sell-offs, tighten already strained rental conditions, and reduce incentives for further development.
According to the Parliamentary Budget Office, the CGT discount will cost the budget $247 billion in foregone revenue over the next 10 years. A Senate select committee is currently investigating the discount, with findings due to be published on 17 March.
Arvanitopoulos said that while the government said any changes would boost housing supply, the key reason may instead be to raise revenue.
“They say it’s to create more housing supply, but this is the thing. The reality is it’s a tax grab on property,” he said.
“They always go after property because I guess most people have property, and it’s an easy way to get money because if you’re not willing to pay that tax, you’ll sell it to someone who’s willing to pay that tax.”
Build-to-rent incentives welcomed
One piece of legislation that was praised was the Western Australian government’s decision to increase the land tax exemption for build-to-rent developments.
Under the legislation, the land tax exemption for eligible build-to-rent projects will rise from 50 per cent to 75 per cent – a move brokers have broadly welcomed as a positive step towards boosting housing supply.
Loisance, Whitlock, and Arvanitopoulos agreed that policies such as these would encourage investment and boost housing supply.
Whitlock added: “Anything that encourages the provision of affordable housing is a good thing. Of course, anyone who owns property wants to see its value increase, but you also have to look at the whole ecosystem.
“Right now, there’s a serious housing shortage, whether people are trying to buy or access affordable rental accommodation. Measures that help address that are a good starting point.”
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