‘Absolute garbage’: Liberal senator slams ACTU housing tax reform proposal

On Sunday, the Australian Council of Trade Unions (ACTU) released its pre-roundtable pitch ahead of the Treasurer’s August 19-21 economic reform roundtable, which included a suggestion to restrict negative gearing and the capital gains tax discount to one investment property.

Liberal senator Andrew Bragg slammed the idea on ABC Radio National on Thursday, and said taxing a way into boosting housing supply is not possible.

“It’s absolutely garbage. You can’t find a serious, independent economist who would say that would ever solve the housing crisis,” Bragg told ABC Radio National on Thursday.

“I mean, what we have is a major problem of supply. The government has presided over the largest population growth since the 1950s, but also a massive collapse in housing construction, so we need to see more houses built.”

“Raising taxes on housing is not going to result in any new houses being built.”

Bragg said that the Liberal Party would instead focus on cutting red tape to address Australia’s housing crisis.

“Ultimately, they have put a lot of red tape on the building and housing sector over the last three years. Now they say they want to change course. I mean, I think it’s good. They want to change course, but it will be akin to turning around the Titanic,” Bragg said.

“We’re happy to help them find ways to cut red tape, and if good ideas come out of these roundtables, then we’ll back them.”

A report by the Productivity Commission found that regulatory burdens were slowing down housing construction in Australia and hampering the government’s National Housing Accord goal to build 1.2 million homes over five years.

The average time to complete a single detached house was 10.4 months in 2023–24, compared to 6.4 months a decade earlier, the PC found.

It recommended that the government improve coordination between regulatory decision-makers to ease construction bottlenecks, and ensure that regulatory agencies were adequately resourced.

“Governments also need to adequately resource regulatory and service delivery agencies to enable timely decisions, and ensure there is sufficient accountability,” the report said.

In its pre-roundtable submission, the ACTU said it would support faster development approvals for new housing and green energy projects, and modular housing initiatives, which it said would be “quicker and cheaper” than using conventional building materials.

It also argued that Australia’s current tax policy settings were contributing to the housing crisis by favouring property investors over workers.

“Tax rules around investment properties means investments that could be made in making Australia more productive and growing our economy are locked up in housing,” ACTU secretary, Sally McManus, said.

“We cannot continue down the same path of giving investors tax support while owning your own home gets further out of reach for average workers and becomes nearly unimaginable for young people.”

Accounting firm BDO’s pre-roundtable pitch also called for housing tax reform, arguing that Australia’s current housing tax settings hurt productivity as they incentivise investments in “unproductive” existing housing stock.

It proposed that negative gearing should be restricted to new builds only, to ensure it was incentivising new supply.

“The taxation system has the potential to assist in increasing the supply of housing by restricting negative gearing for residential properties to newly built properties,” the submission read.

It also proposed that the 50 per cent capital gains tax should be replaced with cost base indexing, calling the capital gains tax discount “overly generous” in the current low-inflation environment.

Others have argued that the tax settings’ contribution to the housing crisis had been exaggerated.

The Grattan Institute estimated that rolling back negative gearing and the capital gains tax discount would cause house prices to fall by about 1 per cent, while decreased investment in new housing could raise rents by around $1 per week.

In April, Grattan Institute policy analyst Matthew Bowes said, “We [the Grattan Institute] think their impact on the housing market has at times been overblown.”

“The total value of Australia’s housing stock is currently more than $11 trillion. And rolling back these tax concessions in the way we recommend would raise about $11 billion in revenue. So, it’s just a very small drop in a very large ocean,” Bowes said.

However, he noted that the concessions were costly at a time when structural pressures weighed heavily on the budget, and questioned whether they were worth the foregone tax revenue.

“That said, while $11 billion sounds like a very small amount in the context of the housing market, it’s a lot of tax revenue in the context of the budget that we’re foregoing without a strong rationale for it.”

“On top of that, while removing these concessions might only have a minimal impact on house prices, it would help shift the balance slightly away from property investors towards home buyers.”