Tax breaks for negative gearing and capital gains should be reconsidered by the government if housing is to be made affordable, one industry figure has said.
According to Australians for Affordable Housing campaign manager Sarah Toohey, failure to address the tax incentives that drive up house prices will condemn future generations to high housing costs and financial insecurity.
Speaking to Smart Property Investment, Ms Toohey said the incentives of negative gearing and its associated tax benefits have attracted a suite of small scale investors that are making it increasingly difficult to gauge how the rental market would be affected.
“There’s something like 1.6 million tax payers who claim an income from a rental property, which is really huge, and that essentially has implications for the quality of the rental market,” Ms Toohey said.
“ It’s very hard to make decisions about how the rental market will be affected when there are no large scale players in that market, so every small scale investor makes their decisions based on a whole range of factors that are very hard to predict because of the small scale nature of it.
“That has implications for the quality of rental housing and the problem is when we talk about rental housing, we’re not talking just about someone’s investment, we’re actually talking about someone else’s home as well,” she said.
Ms Toohey’s comments come as government ministers and industry figures meet in Canberra today for a two-day tax summit, in which former treasurer Ken Henry is expected to speak about his tax review and the implications of unaffordable housing.
Australians for Affordable Housing, a coalition of national housing, welfare and community sector organisations, has been pressuring the government in recent weeks to consider reforming tax breaks that encourage Australians to invest in housing to make a loss. “We’ve been calling on the government to put this back on the table,” Ms Toohey said. “We need to look at the tax incentives that drive up house prices and we think there’s going to be a lot of pressure within the summit over the next couple of days to have a look at these issues.”
Ms Toohey believes the existing tax breaks are not aligned to policy, and cites the National Rental Affordability Scheme (NRAS) as one example of a positive solution to affordability concerns.
“NRAS is a really good example of where tax breaks are used for a particular policy outcome,” she said.
“We need to be much more targeted in the way we provide incentives for investment in housing, and it does need to be targeted to investment in new housing [rather than existing housing].”
The federal government’s tax summit continues tomorrow.