Federal Politics

What negative gearing? Value of controversial policy never examined by Treasury under Abbott

The Abbott government never asked Treasury to do any serious analysis of options to limit negative gearing during its time in power, despite increasing calls from economists and public policy institutes to do so.

And as debate rages over whether the Turnbull government will increase the GST, or instead curb top-end superannuation concessions and property tax breaks, Treasurer Scott Morrison will not say whether he has asked for any such analysis from Treasury either.

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Assistant Treasurer Kelly O'Dwyer tells ABC's Insiders that all tax reform options remain 'on the table', but plays down the prospect of the Turnbull government moving to curb negative gearing. Courtesy ABC News 24.

Public policy groups including the Grattan Institute, McKell Institute, and the Australian Council of Social Service, and prominent economists such as Saul Eslake, have called on the Abbott government to change the negative gearing and capital gains tax regime.

They have argued the regime arbitrarily inflates the price of homes, distorts the housing market in favour of older and wealthier Australians, and should be changed to reduce the pace of house price growth and make housing more affordable.

The McKell Institute has said if the regime was quarantined to new housing it would save the Commonwealth budget roughly $4 billion a year, and lead to a budget improvement of $41.7 billion cumulatively over 10 years.

But the Abbott government rejected calls for the negative gearing and capital gains tax regime to be changed, dismissing concerns about its impact on the budget and saying analysis showed it was encouraging new investment and boosting housing supply.

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Former Treasurer Joe Hockey dismissed concerns about the tax regime by saying young people who wanted to buy their first home should "get a good job that pays good money".

But Treasury's head of revenue, Rob Heferen, has confirmed to Senate estimates that the Abbott government never asked Treasury to do any "substantive analysis" of options to limit negative gearing to specifically encourage new housing supply, including its impact on the budget.

"In the last two years, Treasury has not done any substantive analysis of options to direct or limit negative gearing to new residential housing," Mr Heferen said in an answer to a question on notice last week.

Labor senator Chris Ketter, who asked Mr Heferen the question in Senate estimates last October, says he is amazed by the lack of analysis.

"That to me is extraordinary when we've had a process under way of a significant review of the taxation system," Mr Ketter said.

"It would be extraordinary if that option were to emerge now without Treasury having done any substantive modelling in relation to it."

It is understood the Turnbull government is considering negative gearing seriously as an option for tax reform, but the Treasurer's office will not say if they have asked Treasury to investigate the policy option.

A spokesman for Mr Morrison says the government is "engaged in an open discussion on how our tax system can better back Australians to work, save and invest".

"This process continues. The government has not ruled anything in or out and to claim otherwise would be false," the spokesman said.

The Property Council has said negative gearing is a commonplace investment strategy "used by everyday Australians looking to get ahead."

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