Ready, aim…?

Government keeps property investors in its sights in lead-up to May Budget.

Couple Planning Tax

As political pressure intensifies on the hot topic of housing affordability, the Australian Government is keeping property investors in its sights with a range of measures spruiked in the lead-up to the May Budget.
 
Having ruled out the Opposition’s plan to dump negative gearing, the Government revisited the idea of reducing the capital gains tax concession. The concession is currently 50 per cent and there is speculation this may be halved to 25 per cent.
 
Another idea touted is to impose a tax on vacant property. It is estimated that almost five per cent of rental properties (predominantly apartments in big cities) sit unoccupied. The justification for taxing vacant property was that it could prove an incentive for owners to either sell the property or bolster rental stock.
 
It was also reported by The Australian Financial Review that the Government was examining ways to cap the value of tax breaks for housing investment. Consideration was being given to limiting the number of properties that investors could buy or alternatively imposing a dollar value limit on how much could be negatively geared by investors. 
 
The move was viewed by some as a tax on the very wealthy, with the Government pointing out that 72 per cent of property investors own just one property and 90 per cent own no more than two (suggesting that preventing negative gearing from the third property onwards could be an option). While figures from the ATO showed that the number of Australians with at least five rental properties surged 6.3 per cent to 37,213 in 2014-15, the Property Council of Australia noted that people with six or more investment properties made up just 0.009 per cent of property owners. Both the Grattan Institute and the HIA cautioned against the option citing a potential negative impact on the rental sector.
 
Around 10 per cent of Australians own investment properties, yet 30 per cent are renters. Which means imposts designed to affect the few, could impact many. 
 
As such, industry experts have cautioned that measures imposed on property investors, with the aim of improving housing affordability, could have the flow-on effect of negatively impacting rental affordability. 
 
As the Budget is handed down, it remains to be seen what measures, if any, are directed at the property investor and ultimately what impact these have in addressing housing affordability or, conversely,  jeopardising rental affordability.