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Morrison warns of negative gearing "dangers"


Changes to tax breaks for property investors are not yet off the government’s tax policy agenda, but Treasurer Scott Morrison has warned of the dangers of making changes to negative gearing.

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Morrison today insisted the government was “going through the processes like it did on the GST” as it considered what to do with negative gearing.

It had looked at “some options”.

“But the dangers of making changes to this area are very real,” Morrison told reporters in Canberra on Thursday.

He seized on economic modelling that he claimed showed Labor’s negative gearing policy could lead to lower house prices, rent rises of up to 10 per cent, cost the budget more than it saves and cause unemployment to rise.

The modelling, produced before Labor had released its policy, predicts a decade of disruption in the housing market, tighter supply for rental premises and a string of unintended consequences.

Morrison said the findings were a “damning indictment” of Labor’s policy to limit from July 2017 negative gearing to newly-constructed homes.

“It’s bad news if you own a home, it’s bad news if you’re an investor in a home, and bad news if you’re renting a home,” he told ABC radio.

Shadow treasurer Chris Bowen dismissed the modelling as a “poor excuse” for an analysis.

“I was surprised it wasn’t predicting a locust plague,” he said.

Labor had found “error after error” in the modelling and questioned who commissioned the analysis.

“It is an atrocious piece of political propaganda,” Bowen said.

The modelling weighs the effects of limiting negative gearing to new homes only, excluding established homes from the tax break as of July 2016.

Labor proposes to restrict negative gearing to new housing from July 2017, along with some changes to capital gains tax.

The BIS Shrapnel modelling higher rents would push 70,000 households into rental stress, where they are paying out more than 30 per cent of their incomes on housing costs.

On the budget, BIS Shrapnel estimates $2.1 billion a year would be gained, but that would be offset by a loss of $1.8 billion from a drop-off in building activity.

When lower capital gains tax, stamp duties, GST receipts, council rates and land tax receipts were taken into account, the loss to the budget would be $1.65 billion a year.

However, the report noted there was no notable change of behaviour, or deviation from trend, during 1985-87 when negative gearing was temporarily abolished by the Hawke government.

Grattan Institute chief John Daley dismissed the modelling, telling The Australian the failure of BIS Shrapnel to reveal who had commissioned the modelling compromised its findings, some of which did not pass the “giggle test”.

The Greens dismissed the modelling as unworthy of the paper on which it was printed.

Deputy leader Scott Ludlam said it was likely an attempt by a vested interest to influence the debate.

“They’ve effectively said property prices would go down, rents would go up, investment would shrink, the earth would spiral into the sun,” he told reporters.

BIS Shrapnel associate director Kim Hawtrey said the report was authored during the past few months, before Labor released its policy, and wasn’t directed at any particular policy.

He told ABC radio the modelling was commissioned for commercial reasons, not for political reasons by a private client who was not the real estate lobby or any political entity.

with AAP

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