Urban Taskforce | Media Releases
Calls for negative gearing changes overlook clear Henry Tax review findings
03 June 2011Suggestions that government should consider winding-back negative gearing overlooks the clear findings of the Henry Tax review released just 12 months ago, according to the Urban Taskforce.
Comments on negative gearing by the ANZ Bank's Australian chief executive Phil Chronican have been widely reported in the media this morning.
Mr Chronican has reportedly said that Governments might want to look at whether negative gearing tax breaks are fostering an unhealthy focus on housing as an investment and compounding the affordability issues."
The Urban Taskforces chief executive, Aaron Gadiel, said around 70 per cent of individual rental landlords depend on negative gearing to support their investment.
Small investors are an important source of funding for new home construction, Mr Gadiel said.
Investor activity in the residential housing market boosts housing supply, by funding the construction of new homes that renters cannot afford to own outright.
Given that our national undersupply of housing now exceeds 200,000 homes, public policy should focus on allowing more investor participation in the residential property market, not less.
Policies that try to force down home prices, without also reducing the cost of supplying new homes, will only kill-off new home construction.
Last years Henry Tax review examined whether or not there should be changes to the system of negative gearing for rental properties. The review found that:
¢ negative gearing for rental properties should be retained;
¢ changes to negative gearing should only take place after reforms to the supply of housing, such as the approvals processes around the planning system;
¢ the current tax benefit available for negatively geared properties may place downward pressure on rents;
¢ stamp duty should be abolished.
The best way to make housing more affordable is to reduce the cost of supplying new homes, Mr Gadiel said.
Mr Gadiel said this could be achieved through:
¢ lower and more rational development levies;
¢ a simplified planning approvals system that reduces developer holding costs; and
¢ a planning system that allows more competition between landowners, to reduce the cost of acquiring development sites.
The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.