Shocking Sydney grandchildren claim if negative gearing continues unchanged
The bombshell call by ACTU secretary Sally McManus will be taken to the Albanese Government's productivity roundtable, which will be held in Canberra in August.
Warning families can no longer afford to buy a home, unions want the Prime Minister and Treasurer to announce a huge backflip that will change the way negative gearing works in Australia.
Under the plan, the tax breaks will be limited to one property only by 2030, which could force a massive sell-off of investment properties.
Negative gearing allows landlords to deduct losses on a property – when expenses exceed rental income – against their taxable income.
It can apply to any type of investment, not just housing. Individuals who are negatively geared can deduct their loss against other income, such as salary and wages, and it's entirely legal.
Critics argue that negative gearing hurts first-home buyers because they don't have access to tax deductibility to subsidise interest payments.
'I just say, we've got to bite the bullet,' ACTU secretary Sally McManus told ABC's Insiders on Sunday.
'Otherwise, we're just saying – too bad young people, you're not going to be able to ever own a home, forget about even thinking about it.
'Since 2019, the problem has just got worse. It's going to continue to get worse unless the government is brave enough to do something about it. We are just abandoning those generations and we think that that is fundamentally wrong.'
Ms McManus said the biggest issue in terms of living standards for younger people in Australia is the issue of housing affordability.
'It's the number one issue. We need to address it,' she said.
'Young people should have the same aspirations as the generations before them. And at the moment, then don't.
'It's been wiped out by the fact that the housing prices have gone up twice the rate of wages over the last 25 years. Twice the rate.
'Now, supply is part of that issue and we've got proposals around that. But we also think that the tax system has to change, too. Because that has fuelled those housing prices and taken it out of reach for young people.'
'We're going to take a proposal that both negative gearing and capital gains tax should be reformed,' she said.
'That they should be limited to one investment property and grandfathered for the existing arrangements for five years to allow people to adjust.
Ms McManus confirmed that under the union proposal, after that, you can only have one negatively geared property.
'Yes. And so, you can have as many investment properties as you want, but in terms of the tax benefit, limit that to one,' she said.
'The issue is that a small number of investors, and we're talking about 1 per cent of investors, own 25 per cent of the investment properties.
'And that has been driving or fuelling the housing prices. And so, I don't think that we ever intended even for this to happen as a result of these tax measures. But this is where we're at.
'Unless we change it, working people can't live where they work.
'They can't live where they grew up. It is causing an enormous amount of pressure on people and a really disturbing thing is that a study in New South Wales said that there will be no grandchildren in Sydney because people between the ages of 30 and 40 can't afford to live there.
Ms McManus also called on the government to 'get behind modular housing.'
'It's quicker and faster and cheaper in terms of producing those houses,' she said.
'Also, the rules around superannuation funds investing in housing are too limiting. And that's holding back investment in housing as well.'
The Treasurer has opened the door to a broader debate on potential tax changes at the government's economic reform summit.
'I expect, I anticipate, I welcome tax being an important part of the conversation,' Mr Chalmers told reporters in an address to the National Press Club.
But Anthony Albanese has repeatedly pushed back on the wisdom of negative gearing reforms, hinting that it could increase rents by not boosting housing supply.
Economists warn that reforms to negative gearing could put modest downward pressure on housing prices, a boost for first-home buyers.
Some experts believe that reducing the incentives for investors could reduce home prices by 2 to 4 per cent in the medium term if negative gearing reforms are combined with capital gains tax changes.
But the flip side is that increasing taxes on property investors could deter investment in new apartments and homes, ensuring that the undersupply of houses that is driving soaring rents only gets worse.
'Well, when it has been looked at, it's been shown that it won't assist supply, and that's the problem here,' Mr Albanese said last year.
'For many people, of course, if you didn't have investment in housing, you wouldn't have private rentals, you would have less supply, and less construction is the concern which is there.
'Look, my view is that the key to housing policy is supply,' he said.
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