Aussie Labor Party's plan to raise taxes on property investors

Daily Mail​

4 days ago

Labor Party activists are pushing to scrap the discount on capital gains tax when selling investment properties, despite Anthony Albanese ruling out such changes when in Opposition. Former Labor leader Bill Shorten lost the 2016 and 2019 elections with a plan to halve the 50 per cent capital gains tax discount to 25 per cent.
The lesson of those election defeats led Albanese to rule out tinkering with capital gains taxes after he took over as Labor leader, and he went on to win the 2022 election and was resoundingly re-elected in May. But now a grassroots organisation within the Prime Minister's own party – Labor for Housing – wants the 50 per cent capital gains tax discount scrapped entirely, not just diluted.
That meant someone who made a $100,000 capital gain on their investment property would be taxed on the entire increase, not just $50,000 of it. Labor for Housing co-convener Julijana Todorovic (pictured) told Daily Mail Australia the 50 per cent capital gains tax discount for selling residential properties introduced in September 1999, needed to be dismantled. 'We think it should be removed entirely, so not immediately,' she said. 'Property should not be an investment for which you can claim the discount.'
Ms Todorovic, a land rights lawyer, said the Albanese government should change policy before the next election campaign. 'Our view is that the Labor government now has a mandate to rectify inequity in Australian society,' she said. 'While it's clear from the election results that we can't be too radical, we must do something to stem the flow of generational inequity.' She argued the 50 per cent capital gains tax discount should be grandfathered for existing investors but scrapped for future purchases - a position the Greens took to the May election. 'We are proposing that residential property is removed as a category for which the discount can be claimed,' Ms Todorovic said. 'But we're proposing that this change is grandfathered to a certain date – so if people have structured their finances based on the discount, then they will have time to restructure – they won't be left high and dry.'
Labor for Housing argued that scrapping the discount would encourage investors to invest in technology and businesses, rather than putting all their funds into real estate and thereby driving up the country's massive house prices. 'Australia's capital resources have become landlocked by a CGT discount on property,' it said in a submission to the government's August Economic Reform Roundtable. 'As Australia electrifies, transitions to renewables and increases our data capacity, businesses are struggling to find adequate capital. By incentivising investment in the productive powers of the market, the government can increase the circular flow of capital in the economy, creating jobs and additional economic activity.'
The Greens went to the last election with a plan to scrap the 50 per cent capital gains tax discount for future purchases of investment properties, and grandfather it to one property for those who already owned an investment property. While Labor has a landslide majority in the House of Representatives, it needs the Greens or other Senate crossbenchers to get its legislation passed by the Upper House. The Labor-aligned McKell Institute has called for the federal government to reduce the 50 per cent capital gains tax discount to 35 per cent for existing investment properties with a backyard. This means $65,000 of a $100,000 capital gain would be taxed, up from $50,000 now.
But it has also called for the 50 per cent capital gains tax discount to be increased to 70 per cent for newly-built apartments, arguing this kind of policy would boost housing supply and encourage more off-the-plan unit developments. That means only $30,000 of a $100,000 capital gain would be taxed - and force more Aussies into apartments rather than homes with a backyard as Labor aims to build 1.2million homes over five years. The McKell Institute's Harnessing Aspiration report argued the existing 50 per cent capital gains tax discount encouraged investor speculators to buy up houses at a time when there is a shortage.
'There is a unique incentive for investors to speculate on existing detached houses rather than non-existing off-the -plan attached dwellings or established attached dwellings,' he said. 'The blanket tax treatment of each of these asset types means an investor is much more attracted to high-growth existing detached dwellings than moderate-growth attached dwellings, especially new builds.' The average, full-time worker earning $102,742 a year is priced out of buying the median-priced house in every state and territory capital city except Darwin.