The MFAA has said it supports the reforms’ goals but warned that the CGT changes could hurt deposit savers and small brokerages.
The MFAA’s warning lands in a tight political window, with the first tranche of the government’s capital gains tax (CGT) and negative gearing measures passing the lower house on 5 June.
The bill is now being scrutinised by the Senate economics legislation committee, which is holding hearings on Monday and Tuesday (15 and 16 June) under fast-tracked inquiry rules, yet no broker groups have been called up to present at the hearings.
Labor wants the bill through the upper house by 2 July ahead of the winter recess, while the Coalition and several industry groups have been pressing for a longer review of what would be the most significant investor tax changes in decades.
First home buyers’ savings strategies in the spotlight
In its submission to the inquiry, the Mortgage & Finance Association of Australia (MFAA) said the reforms risked undercutting how younger households saved for a deposit.
Drawing on feedback from its membership, the MFAA said that many would‑be first home buyers (FHBs) no longer relied solely on cash in a savings account to build a deposit.
“Many aspiring FHBs use a range of investments outside of a traditional bank savings account, including shares and managed investments, as part of their strategy to save for a home deposit,” it said.
“Members have expressed concern that changes to capital gains tax settings may affect the attractiveness of these investment options and, in turn, the ability of some prospective home buyers to build a home deposit sooner.”
The association asked lawmakers to look beyond the headline housing objectives and test how the reforms would play out for would‑be owner‑occupiers.
“This includes the potential impact on those using diversified investment strategies, as well as the importance of clear and accessible guidance to support implementation of reforms,” the submission said.
The MFAA suggested limiting the new CGT settings to property investments rather than sweeping in other asset classes that FHBs often use as stepping stones.
Call for clearer guidance from Treasury and the ATO
The MFAA is also worried about how borrowers and brokers will navigate the transition period once the legislation takes effect.
To avoid confusion, the association wants Treasury agencies to take the lead on public explanations.
“The MFAA encourages Treasury and the Australian Taxation Office to provide clear, practical and timely guidance to consumers and their trusted advisers,” it said.
Small broking businesses and succession risk
The submission also highlighted the impact on brokerages themselves, most of which are small, relationship‑driven businesses where the eventual sale of the trail book is a major retirement asset.
“Mortgage broking businesses are predominantly small businesses whose value is derived from self-generated goodwill, client relationships and recurring income, rather than substantial upfront capital investment,” the submission said.
The MFAA said that shifting the CGT dial may create fresh uncertainty about when and how broking business owners can retire.
“The concern for small broking businesses is that CGT changes may reduce certainty around long-term business planning. Many mortgage brokers rely on the eventual sale of their business as a key component of their retirement planning, having prioritised investment in growing their business over accumulating other assets,” the MFAA said.
The MFAA said that the current indexation approach would hit service‑based firms harder than capital‑intensive ones, due to the fact that their book value has been built through labour and reinvested earnings rather than large initial purchases.
It said that the package “risks weakening incentives for small business owners to build, scale and invest in their businesses if the after-tax reward for creating enterprise value is materially reduced”.
To address those concerns, the MFAA has aligned itself with the Council of Small Business Organisations Australia (COSBOA) on modernising existing concessions rather than leaving them fixed while new rules are layered on top.
“The MFAA supports COSBOA’s recommendation that, at a minimum, the Small Business CGT Concessions be modernised, and eligibility thresholds updated to reflect contemporary business conditions and align with broader government definitions of small business,” the submission said.
[Related: Inquiry lays bare housing crisis as tax reform bill reaches Senate]
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