FBAA warns CGT shake-up will deepen rental pain

He said that reducing tax incentives for investors would inevitably translate into fewer rental properties at a time when vacancy rates were already at critical lows.

“Less rental properties can only drive up rental prices which have already risen significantly across Australia over recent years,” he said.

Despite acknowledging the political pressure on the government to improve housing access for younger cohorts, White stressed that the proposals, as reported, would fall hardest on those very groups.

“While I commend the government for wanting to open up more housing, these changes will disadvantage the very people it seeks to help – younger Australians, as well as many other people on lower incomes,” White said.

Affordability logic ‘overly simplistic’

Despite initial reporting indicating that the government would lower the capital gains discount, it is believed Treasurer Jim Chalmers is weighing up a shift away from the current model introduced in 1999 altogether – and that the policy would be a central plank of the upcoming May budget.

The earlier Hawke–Keating model, which the government is reportedly seeking to reintroduce, halved the taxable gain on assets held for more than a year and taxed only inflation-adjusted “real” gains.

Any such move is expected to raise additional revenue, yet cool investor demand, which has recently returned to near‑record highs in some markets.

White said the assumption that trimming investor tax breaks would materially reduce dwelling prices, thereby opening the door to those currently unable to secure finance, ignored how lenders assessed risk and capacity.

“The theory that this will drive down the cost of housing to the extent where someone who can’t currently afford to service a mortgage and enter the property market, will suddenly be able to, is overly simplistic and ignores the many other factors in loan approval,” he said.

According to the association, even a modest softening in prices would do little for aspiring first home buyers if their rent continued to climb, which would erode savings for a deposit.

Survey points to mounting rental and mental strain

The FBAA backed its warning with findings from its 2023 Australian mortgage and rental affordability survey, conducted by research firm McCrindle.

The research found that many renters had been forced to take additional jobs, cut back on essential spending and sell assets in order to meet rising housing costs, with more than half reporting heightened stress and others citing social isolation and increased family tension.

The association said that any tax measure likely to nudge rents higher would compound a growing cost‑of‑living crisis.

White said the burden would fall both on households trying to save for a deposit and on long‑term renters with little prospect of buying.

“Someone renting with the aim of buying a home won’t be able to save a deposit as easily, while many who are renting because they are already doing it tough will struggle to meet the increased repayments,” he said.

The FBAA also highlighted reports of extreme competition for available properties as evidence that the system could not afford a further hit to investor‑supplied stock.

“In many parts of Australia, there are 10–20 people or more looking at one rental property such is the lack of availability now, so why would we reduce that supply even more?” White questioned.

[Related: Policy think tanks call on government to reduce CGT discount]