Overview
- Last week the government introduced an omnibus budget bill that would scrap the 50% capital gains tax discount in favour of inflation indexation with a 30% minimum tax and phase out negative gearing for new investment property purchases.
- Treasury modelling released with the budget predicts only a mild short-term hit to prices and estimates about 75,000 rental households could become owner-occupiers because of the reforms.
- Banks and property groups have issued stronger warnings that investors could pull back, reducing turnover and widening price or rental volatility, and some private forecasts put possible price falls much larger than Treasury’s 2% estimate.
- The bill has been referred to a Senate committee for detailed review and the government is running fast consultations on carve-outs for start-ups and small businesses while pledging to grandfather existing investors and keep incentives for new home builds.
- The policy pairs tax changes with a $47 billion housing package the government says will deliver hundreds of thousands of new homes over a decade and seeks to correct a market shift that began after the 1999 CGT discount boosted property investment at the expense of younger buyers.