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In an exclusive conversation with Momentum Media director Alex Whitlock, Treasurer Josh Frydenberg has focused on the ability to offset net rental investment property losses against wage income (negative gearing).
The Labor Party had gone to the 2016 and 2019 federal elections with proposals to limit negative gearing to new housing only, and to halve the capital gains tax concession for property investors down to 25 per cent.
But in July this year, the federal opposition abandoned its prior policy reforms against negative gearing and capital gains tax, pledging that it would maintain the government’s existing schemes if voted into power at the next election.
However, the federal Treasurer and deputy leader of the Liberal Party suggested that there would continue to be clear delineations between both of the major parties when it comes to taxation settings in the housing sector.
“It was something that the Labor party was seeking to stamp out in their war on aspiration, and we fought it very hard at the last election. But they’ve always got secret plans, despite what they say today,” Mr Frydenberg told Momentum Media.
“And no doubt you’ll see at the next election; another battle line between us and the Labor party on taxes, because they revealed what they really think and will do at the last election.”
Mr Frydenberg stated the negative gearing issue had been a “real battle”, noting there were around 1.3 million people with negatively geared properties.
“It was seen as an opportunity for people to get into the housing market, to get access to an asset, which would help them over the course of their lifetimes and build their economic security,” The Treasurer added.
He also repeated a previous election claim that the negative gearing measure mostly helped middle-income earners, suggesting that “about two-thirds of those with negative key properties had a taxable income of less than $80,000”.
Bodies such as the Grattan Institute have recently renewed calls to scrap negative gearing in the ongoing parliamentary inquiry into housing affordability.
The Grattan Institute has said tax reforms such as removing negative gearing and slashing the capital gains tax discount from 50 to 25 per cent would be the “most direct way” the federal government could improve affordability.
It estimated the two tax changes would cut property prices by around 2 per cent lower than they would have been otherwise.
Mr Frydenberg also reflected on the government’s home-ownership schemes such as HomeBuilder and the loan guarantees for first home buyers and single parents, which have seen more than 50,000 people sign up since they began last year.
He noted that there had been a leap in first home buyers in market generally, with 170,000 recorded in the year to July, compared to the 10-year annual average of around 100,000.
“We have obviously supported the construction industry and the housing sector with the HomeBuilder program. We’ve committed over $2.5 billion to that program, we saw over 130,000 applications and it was expected to support more than $30 billion in residential construction,” Mr Frydenberg stated.
“The combination of historically low interest rates, as well as programs like our HomeBuilder, First Home Super Saver Scheme and home guarantee schemes, I think, have been very important in driving economic activity and driving greater home ownership.”
Looking forward, the Treasurer also told Momentum Media he was “pretty optimistic” about how the economy is travelling, forecasting that job numbers will rebound as lockdowns wind down in NSW and Victoria.
“I’m also very confident that as restrictions ease, we will see people back in work and we’ll see businesses reopen and monetary policy will stay accommodative,” Mr Frydenberg said.
This story is one in a series of articles from the interview between Momentum Media director Alex Whitlock and federal Treasurer Josh Frydenberg.
You can find out more about Mr Frydenberg’s thoughts on Australia’s future economic environment here, and learn more about his thoughts on the role of mortgage brokers on competition in our sister brand, The Adviser, here.
[Related: Federal Treasurer backs economic recovery as NSW emerges from lockdown]
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