In its submission to the Senate Economics Legislation Committee, the Property Council of Australia has warned the Federal Government’s proposed changes to capital gains tax and negative gearing are at odds with its own housing supply agenda and risk further constraining the delivery of new homes.
Property Council chief executive Mike Zorbas said the current package is hurting market confidence and will put new housing and new projects at risk.
“Australia’s housing challenge is a supply challenge," Zorbas said.
"The government has confirmed these changes fail the most important test - they deliver fewer homes.”
The submission sets out that the proposed tax changes come into a system already under sustained pressure, with elevated construction costs, financing constraints, tradie shortages and post approval bottlenecks against the background of confidence-sapping changes to discretionary trusts.
It warns that weakening investment conditions will directly impact project feasibility and the number of homes that get built.
“Projects don’t proceed unless they stack up," said Zorbas.
"When you increase costs or reduce confidence, fewer projects get built.
“Taxes on investment in new housing are already sky-high.
"Almost 40 per cent of the cost of a new home is taxes and charges across all levels of government.”
Zorbas warned that layering additional uncertainty across multiple parts of the tax system risks dampening investment at precisely the time it is needed.
“The CGT and negative gearing reforms - combined with the Budget night tax hike on discretionary trusts and the retrospective foreign land CGT changes - are creating significant uncertainty across an industry that directly employs more than 1.4 million people.”
“I urge the Parliament to consider that if changes to CGT and negative gearing do proceed despite the project impacts outlined, grandfathering and the carve-out of new builds will be essential to protect market confidence and ultimately jobs.”
