According to analysis performed by the Parliamentary Budget Office, the cost of negative gearing will skyrocket as interest rates rise, reaching $97 billion over the next decade. Meanwhile the cost of capital gains tax discounts will reach $60 billion over the next 10 years, bringing the total cost for both tax concessions to $157 billion.
According to the distributional analysis done by the PBO, 56% of the two tax concessions will go to the top 10% of income earners, with 85% of capital gains tax discounts going to the top 10% of earners over the next 10 years.
The analysis is based on an official cash rate of 2.85%, which the RBA announced on Tuesday. The totals are measured for 10 years from the 2023-24 financial year.
Lines attributable to Max Chandler-Mather MP, Greens spokesperson for Housing and Homelessness:
In the middle of one of the worst housing crises in our country's history, the Federal budget includes $157 billion worth of tax concessions to property investors, 56% of which will go entirely to the top 10% of income earners.
When it comes to capital gains tax discounts, I have no idea how Labor justifies a tax concession that will see 85% of the benefit flowing to the top 10% of income earners.
Negative gearing and capital gains tax discounts work together to artificially inflate house prices, and turbo charge inequality, funnelling tens of billions of dollars into the pockets of the top 10% of income earners in Australia.
These tax concessions alone mean it is often easier for a property investor to buy their fifth house, rather than someone to buy their first home, and that’s deeply unfair.
The higher interest rates go, the more negative gearing will cost the budget, which means right at the time when the government needs extra revenue to help alleviate the cost of living crisis they are instead handing it over in the form of tax concessions to wealthy property investors.
Rather than spend $157 billion on tax concessions to property investors, the government should scrap negative gearing and capital gains tax discounts and invest the extra revenue in building well designed public and community housing, bringing dental into Medicare and cutting energy bills.