It started with a noble goal – modernising Australia’s tax system to create a stronger economy. The idea was to wean governments off bad taxes that are a drag on jobs and growth, and replace them with fairer and more efficient taxes.
Doing so would grow the economy, which would not only create jobs but also improve the financial stability of governments.
Tax experts, economists, business groups and the social services sector have been unified in their desire to see governments across the country pursue this goal.
However, both the Federal Government and the Opposition are seemingly no longer interested in genuine tax reform. Instead, they are plotting a risky intervention in Australia’s property market to try to grab more tax.
In the case of the federal Opposition, they are hoping to get their hands on an extra $32 billion in property taxes over 10 years by limiting negative gearing to new dwellings and halving the capital gains tax concession that applies to property.
Both of these measures have been long-standing features of our tax system and have been critical in allowing ordinary Australians to save for their future through property.
The fundamental questions to ask are what will a $32 billion property tax grab mean for the housing market? What will it mean for everyday Australians who want to invest in property as a means to save for their future? Will house prices increase or decrease? What will happen to rents? What impact will it have on jobs in construction, real estate, and professional services?
Will we create a social housing calamity because there will be less low-cost private rental accommodation available?
The truth is, no one really knows. That is why it is so risky.
Unfortunately, national debates like this often gravitate to a focus on Sydney and Melbourne. But examining this issue through a Queensland lens may produce a very different perspective.
There are 260,000 Queenslanders who currently use negative gearing.
These investors are spread right across the state and they are providing housing, jobs and economic activity wherever they invest.
For example, there are about 4300 negatively geared properties in Cairns, and 2500 in the middle-ring Brisbane suburb of Mount Gravatt.
Most people who buy an investment property are mums and dads who are trying to do the right thing and not be a burden on taxpayers. In fact, over 65 per cent of people who negatively gear have incomes below $80,000 a year.
We know that the Queensland economy is in transition following the mining downturn. Many of our regional centres are hurting, with job losses an all too common headline. A strong local property industry providing local jobs is going to be crucial to these communities over the next few years.
So tinkering with negative gearing and capital gains tax arrangements could not only affect the ability of ordinary Queenslanders right across the state to save for their future, it could be yet another economic hit to our regional centres at a time when they can least afford it.
The ALP has committed to grandfathering existing arrangements for current owners. But this surely has the potential to increase the divide between the haves and have nots? And how will it distort the market as we head to the deadline? More unknowns.
The Turnbull Government has not yet released its plans, but changes to negative gearing and capital gains tax on property are mooted.
As this debate rolls forward, Queensland’s federal MPs should think carefully about what any changes might mean for their home state. The outcomes are potentially quite different to Sydney and Melbourne.
First published in The Courier Mail, 22 February 2016.