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
1.3 Regarding foreign residents, Labor Senators note answers
to Questions on Notice that confirm that temporary tax residents are not
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.
1.4 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:
- While these bills implement the measure 'expanding tax incentives
for investments in affordable housing' set out in the budget, these bills do not contain any elements which would enable Managed Investment
Trusts (MITs) to invest in affordable housing, as set out in the measure
'affordable housing through Managed Investment Trusts'. This measure was announced in May 2017. It is now March 2018 and
legislation has yet to be introduced into Parliament. A Government committed to
genuine reforms in housing affordability would have acted with more haste.
- Labor Senators note comments from the National Affordable Housing
Consortium (NAHC) which states that the Government has failed to provide clear
evidence about the benefits of introducing this measure:
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.
- The Property Council of Australia also shared this same concern
and had doubts about how effective this tax discount would be:
...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
- Questions on Notice from Treasury officials also failed to
adequately explain how this tax incentive would lead to new supply:
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.
- Given this evidence, it is incumbent on the Government to
adequately demonstrate the benefits expected from this measure and how it will
contribute to new supply of affordable housing.
- Labor Senators are also not convinced that the increase to the
CGT discount will actually add to the amount of housing stock, and not simply
cause more churn through. The minimum holding period in order to qualify for
the increased capital gains tax discount appears to be unduly short to provide
stable, long-term increases in the stock of affordable housing. It may result
in affordable rental dwellings rapidly falling out of the affordable rental
sector, particularly if prices continue to rise rapidly in markets such as
Sydney and Melbourne.
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
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
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.
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:
- Reforming negative gearing and capital gains tax concessions,
resulting in the construction of 55,000 new homes and a boost to employment by
25,000 new jobs per year;
- Improving the National Housing Affordability Agreement,
re-establishing the National Housing Supply Council and appointing a dedicated
Minister for Housing and Homelessness;
- Establishing a bond aggregator to increase investment in
- Working closely with the States and Territories on supporting and
reforming the national housing agreement to strengthen benchmarks across the
housing affordability spectrum such as housing supply, planning reform and
- Providing $88 million for a Safe Housing Fund to increase
transitional housing options for women and children escaping domestic and
family violence, young people exiting out-of-home care and older women on low
incomes who are at risk of homelessness;
- Boosting homelessness support for vulnerable Australians;
- Facilitating a COAG process to introduce a uniform vacant
property tax across all major cities;
- Limiting direct borrowing by self-managed superannuation funds;
- Increasing foreign investor fees and penalties.
Senator Chris Ketter
Senator for New South Wales
Senator Doug Cameron
Senator for New South Wales
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