Restricting negative gearing to new homes and reducing capital gains concessions from 50% to 25% predicted to save about $32bn over next decade.
With just months to go until a federal election is called, Mr Shorten used his speech to the NSW ALP conference to rally the party faithful for the battle ahead.
He said if Labor wins the election, from July 2017 negative gearing would only be available on newly-constructed homes.
The changes under a Shorten government would not affect the tax arrangements for investment properties purchased before July 2017.
Under costings released from the Parliamentary Budget Office, the measures could save the budget $32.1 billion over 10 years once they come into force.
- Labor government would restrict negative gearing to “newly constructed homes”
- Capital gains tax discount reduced from 50 per cent to 25 per cent
- Both measures would come into force from July 2017
- All existing investments under the scheme would be fully “grandfathered” and protected against changes
One third of all new dwelling construction is financed by investors each year. Changes to negative gearing will result in a loss of investment and it will impact housing supply.
Glenn Byres, Chief of Policy and Housing, Property Council of Australia has stated the below:
“A typical new house involves up to 40 tradespeople from bricklayers to carpenters to electricians and plumbers. This is the real economy that negative gearing underpins. It is at risk if the Government tinkers with something that has been an integral part of the tax system for 100 years.
“Negative gearing is the way that many mums and dads get into the housing market and build their prosperity. Two million Australians own an investment property.
“Two thirds of property investors who benefit from negative gearing earn a taxable income of less than $80,000 a year. These are not high income earners.
“There are 840,000 Australians with taxable incomes below $80,000 a year who negative gear. This includes 53,800 teachers, 52,000 retail workers, 35,900 nurses and midwives, 22,600 hospitality workers and 10,400 emergency services workers.
“Interest deductions on property are legitimate deductions. Deductions for interest have been a fundamental part of the Australian tax system for 100 years.