Capital gains tax rise won’t solve housing woes: HIA

The Labor Party’s plan to halve the capital gains tax (CGT) discount on investment properties will not fix the nation’s housing affordability and supply problems, according to the Housing Industry Association (HIA).

Graham Wolfe, HIA’s chief executive of industry policy and media, said reducing the CGT will push investment away from Australia’s housing sector.

“The priority for tax reform of housing must be to reduce the tax burden on new home buyers,” he said.

“Research conducted by Independent Economics on behalf of the HIA, using a model also applied by the Commonwealth Treasury, confirmed that restricting access to negative gearing for residential property would reduce investment in housing, erode housing affordability and put upward pressure on rents.

“The level of taxation on a new house and land package can be up to 44 per cent of the final price, which far outweighs the positive benefits to investment in new housing to support the rental market, of the current CGT or negative gearing regimes."

Mr Wolfe said now is a pivotal time for investment in new housing, with new home starts expected to decline over the year ahead.

“Any changes to taxation with respect to housing must be aimed at boosting housing supply and reducing the overall tax burden on the sector,” he concluded.

[Related: Flavell slams negative gearing changes]

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