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BFCSA: Scott Morrison expressed interest in overhauling negative gearing, according to official documents

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Scott Morrison expressed interest in overhauling negative gearing, according to official documents

ABC News13 May 2019

Dan Conifer

 

EXCLUSIVE  Prime Minister Scott Morrison expressed interest in overhauling housing tax concessions, including negative gearing, just days into his time as treasurer, according to official documents.

The Morrison Government's opposition to the ALP's housing tax plan is central to its re-election pitch.

But Mr Morrison did not appear to oppose changes to housing taxation early in his time as treasurer, according to "sensitive" government documents.

Obtained under freedom of information laws, a senior NSW Treasury official in October 2015 wrote: "The Commonwealth appears more willing to consider broader tax reform.

"The Commonwealth Treasurer has indicated that all options need to be considered, including superannuation, capital gains tax and negative gearing."

Mr Morrison in February 2016 said there were "excesses" in negative gearing and that the government was considering changes.

That same month, federal Labor announced its plan to limit negative gearing and the capital gains tax discount.

Since then, the Coalition has used the issue as a central component of its attack on the Opposition during two election campaigns.

"He knows negative gearing needs reform," Shadow Treasurer Chris Bowen said.

"He knows it's the most generous tax concession for property investment in the world.

"The Liberals know that something needs to change but they've chosen instead to run a cheap, shrill scare campaign."

Commonwealth tax concessions 'erode tax bases'

Negative gearing allows investors who make a loss to reduce their tax bill on other income.

If elected, Labor would restrict the tax break to new properties.

The ALP would also reduce the capital gains tax discount for investment properties purchased after January 2020.

Another NSW Treasury briefing paper takes aim at several Commonwealth tax concessions, saying they "erode its own tax bases".

"Tax exemptions and concessions significantly reduce the efficiency of the personal income tax base, and are very costly," it stated.

"These include negative gearing, capital gains, superannuation and negative gearing concessions in particular."

The ABC put a series of written questions to Mr Morrison about the NSW Treasury advice.

In response, a Coalition spokesman said: "Only the Labor Party [is] proposing a housing tax that will decrease the value of your home and make renting more expensive."

The information was prepared in 2015 before then-NSW treasurer Gladys Berejiklian attended meetings with Mr Morrison and state counterparts.

The NSW public servant who prepared the papers previously worked for the Commonwealth Treasury and was engaging with his federal counterparts on tax reform options at the time.

Mr Morrison replaced Joe Hockey as treasurer in September 2015.

Mr Hockey used his final speech to parliament to call for lower income and business taxes, and a "wiser" use of tax concessions to pay for that.

"Negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock," he said.

The ABC has previously revealed that federal cabinet examined housing tax breaks in early 2016 but decided not to act.

Several ministers reportedly killed off the proposed changes despite Mr Morrison and then-prime minister Malcolm Turnbull being in favour of taking action.

"They just don't want to do it, they don't have the guts to tackle a difficult reform," Mr Bowen said.

Fears for construction jobs and potential lost revenues

Mr Morrison last week said Labor's plans would have a "significant impact".

He quoted research from SQM stating rents could rise by 22 per cent in Brisbane, while prices could fall by 16 per cent in Melbourne.

The Prime Minister also quoted Master Builders research showing 30,000 jobs could be lost in construction.

The Federal Treasury has previously scolded the Coalition for overstating the impact of Labor's negative gearing changes on property prices.

The current NSW Treasurer Dominic Perrottet recently joined two other Liberal treasurers in writing to Labor Leader Bill Shorten about the proposed overhaul.

The trio said the plan had the "potential to further slow the housing market, which will have significant implications for our constituents and also our local economies".

"We also ask that you give a firm commitment to compensate our states for any loss of GST revenue," they said, while also raising the prospect of lower stamp duty revenue.

NSW Treasury modelling this month revealed stamp duty revenue could fall by up to 1.3 per cent under the overhaul, which would add $3 billion to federal coffers over four years.

The department advised the state government in December 2016 that negative gearing created a substantial distortion in the housing market.

Property prices were climbing in 2015 when Federal Labor outlined its proposals.

Prices have since peaked and are now dropping, but the median capital city price is still higher than in mid-2016.

 

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