Independent modelling has dented the Turnbull government's attack on Labor's negative gearing policy, finding it will generate billions for the Commonwealth with the vast bulk of revenue coming from just the top 10 per cent of households who negatively gear their properties.
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Turnbull: 'Be afraid of Bill Shorten'
The price of every home will be devalued under Labor's negative gearing policy, says Malcolm Turnbull. Courtesy: ABC News 24
The report's author says the policy would likely slow the pace of house-price growth and boost new housing construction, making it "potentially the biggest housing affordability policy the country has seen."
Prime Minister Malcolm Turnbull launched a scathing attack on Labor's negative gearing policy on Friday, saying home owners across the country would see the value of the family home "smashed" by the "very blunt, very crude" idea.
In a clear sign his government is preparing to launch a massive scare campaign in the lead-up to the 2016 election over Labor's proposal, which is designed to save $32 billion over a decade, Mr Turnbull warned the policy was "calculated" to reduce the value of all homes.
"The Labor Party's negative gearing policy and its wind-back on the capital gains discount – its increase in tax on capital gains – is a very dangerous one. It's been very, very poorly thought out," Mr Turnbull said on Friday.
"The consequence of it will be a decline in property prices, every home owner in Australia has a lot to fear from Bill Shorten."
But independent modelling shows there will be "significant" long-term savings from Labor's proposal to quarantine negative gearing to new housing investments from July 2017, eventually raising between $3.5 to $3.9 billion a year.
It also shows Labor's proposal to cut the capital gains tax discount from 50 per cent to 25 per cent would raise about $2 billion a year in the long term.
It shows the vast majority of savings would be at the expense of the top 10 per cent of earners who negatively gear their properties.
It also estimates that by restricting negative gearing to new housing, the policy would "increase the share of investment housing devoted to newly built housing" by 10 to 20 per cent.
It does not say house prices would drop.
"Our modelling shows that negative gearing benefits high-income families with 52.6 per cent of the benefit going to the top 20 per cent of incomes," the paper says.
"Only 5.2 per cent of benefits go to the bottom 20 per cent of incomes. This result is mostly driven by high-income families being more likely to negatively gear, having larger negatively geared deductions, and a progressive tax system that magnifies the gains for higher income persons.
The modelling was done by the Australian National University's Centre for Social Research and Methods.
It was not commissioned by any political party, organisation or individual.
Associate Professor Ben Phillips, formerly of the well-respected National Centre for Social and Economic Modelling (NATSEM), did the modelling for the centre for which he now works.
"Most of the benefit of negative gearing clearly goes to the top 10 per cent, and it's the same for the capital gains tax, by a very large margin," Mr Phillips told Fairfax Media.
Labor unveiled its negative gearing policy last weekend, with Labor leader Bill Shorten saying it would "level the playing field for first-home buyers" competing with investors and create up to 25,000 new construction jobs.
The Coalition has criticised the policy, saying it will not raise enough money and it will make it harder for owners of existing homes to sell their properties.
Mr Turnbull upped that attack on Friday, saying it will see the prices of all homes decline.
But Mr Shorten returned fire, saying: "This is desperate stuff from the Prime Minister who has broken his promise to provide 'new economic leadership'."
"Malcolm Turnbull's got no plan except Tony Abbott's old plan," he said on Friday.
"He promised to be better than Tony Abbott and respect people's intelligence - today he showed he is no better."