Additional Comments from Labor Senators

1.1       Labor Senators are broadly supportive of these bills and won't stand in the way of them, but at the outset want to reiterate that the Government's so called 'comprehensive affordability plan' is a sham. The plan is heavy on slogans, light on substance and many stakeholders have criticised the piecemeal approach to reform in this area.

1.2       Labor Senators support the measures in these bills related to capital gains tax changes for foreign residents and near-new dwelling interests.

1.3       Regarding foreign residents, Labor Senators note answers to Questions on Notice that confirm that temporary tax residents are not impacted:

The changes to deny foreign residents access to the main residence capital gains tax exemption, contained in the Treasury Laws Amendment (Reducing Pressure on Housing Affordability No. 2) Bill 2018, will not affect temporary tax residents who meet the definition of Australian tax resident at the time they sell their main residence.[1]

1.4       Labor Senators wish to make a number of comments on the elements in these bills related to the additional capital gains tax (CGT) discount for affordable housing:

The increase in the discount from 50% to 60% is grossly inadequate to drive investment into sub market rental housing. We need an evidence-based approach to the level of incentives required and the distribution of those benefits between the investor and tenant outcomes.[4]

...we believe that this incentive—in isolation—will be ineffective in encouraging institutional scale investment in the supply of affordable housing for members of the community earning low to moderate incomes.[5]

Q: What level of new affordable housing supply is estimated to be created in each year over the forward estimates due to this measure?

A: This measure aims to create the right incentives to encourage private investment in affordable rental housing. The value of this incentive and subsequent take up of this measure will depend on individual circumstances, including the nominal capital gain on an individual's investment and marginal tax rate.[6]

1.5       Regarding MITs, it should not be forgotten that the Treasurer and Minister Sukkar announced in September 2017, without warning, that MITs would no longer be able to invest in residential property, with the exception of affordable housing.

1.6       This shock move could kill the fast emerging 'build-to-rent' movement that has already taken off in the US and more recently in the United Kingdom. It’s a potential new billion dollar addition to the Australian real estate market.

1.7       The Government tells the public that increasing housing supply is a crucial part of dealing with Australia's housing affordability crisis. Labor Senators agree. However, this bizarre banning of MIT purchases of residential property will directly hit housing supply.

1.8       It's one thing to have a discussion with the property sector on what a Government may or may not want to do to encourage or facilitate 'build-to-rent' in Australia, but it's another to kill it before it even begins.

1.9       The Property Council, in their submission to this inquiry, continues to reiterate its support for the 'build-to-rent' sector. They also make concerning comments that the Government's actions have increased sovereign risk:

The September 2017 Treasury Laws Amendment (Reducing Pressure on Housing Affordability No. 2) Bill has created significant uncertainty for investors and increased sovereign risk for international capital looking to support the supply of new residential in Australia.[7]

1.10    Labor Senators continue to urge the Treasurer to reconsider this policy on the run and engage properly with experts in the field instead of making it up as he goes.

1.11    Labor Senators believe that the better policy approach to these tax issues as they affect the emerging build-to-rent sector, would have been to review and consider them in a holistic way—something that Federal Labor has been calling for since October 2017.

1.12    Finally, when it comes to a comprehensive plan for housing affordability, only the Labor Party has a plan that will deliver for all Australians. Labor's announcements on housing affordability include:

Senator Chris Ketter
Deputy Chair

Senator Jenny McAllister
Senator for New South Wales

Senator Doug Cameron
Senator for New South Wales

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