A Shorten Labor Government will deliver the most important structural Budget reform in a decade, that will help fund health and education, bring some fairness back into the housing market and underwrite our nation’s future.
Right now, parts of our tax system are acting as a drag on growth with negative gearing and capital gains tax subsidies costing taxpayers over $10 billion every year.
Labor will reform negative gearing and the capital gains tax discount to ensure that our tax system is fair, sustainable and targets jobs and growth.
Labor’s tax reform plans will help close loopholes so we can direct incentives to where they are needed most and where it will boost economic growth.
Labor’s policy will save $32.1 billion to help fund health and education help balance the Budget, bring fairness back into the housing market and the dream of home ownership back within reach of working and middle class families.
We will level the playing field between first home buyers and investors, boost housing supply, while creating tens of thousands of new construction jobs.
Labor will limit negative gearing to new housing from 1 July 2017. All current investments - and any made before this date - will not be affected by this change and will be fully grandfathered.
The fact is current policy settings are not either creating jobs nor making the dream of a first home more accessible - in 93 per cent of cases, investment loans are used for purchasing existing properties. It is not creating new housing stock and not creating new jobs.
Labor’s policy will change this - analysis by the McKell Institute shows Labor’s ‘Funding Health & Education – and Balancing the Budget’ policy may create up to 25,000 new construction jobs, lead to the construction of thousands of new homes and boost economic growth.
From 1 July 2017, taxpayers will continue to be able to deduct net rental losses against their wage income, providing the losses come from newly constructed housing.
Under Labor’s policy, losses from new investments in shares and existing properties can still be used to offset investment income tax liabilities. These losses can also continue to be carried forward to offset the final capital gain on the investment.
CAPITAL GAINS TAX
Labor will halve the capital gains subsidy for assets purchased after 1 July 2017. This will reduce the Capital Gains Tax discount from the current 50 per cent to 25 per cent.
All investments made before this date will not be affected by this change and will be fully grandfathered.
70 per cent of CGT discounts are being used by the top 10 per cent of income earners. These subsidies are not working as they should and in many cases, the system is being gamed by those who can afford to minimise their tax.
This policy change will also not affect investments made by superannuation funds. The CGT discount will not change for small business assets. This will ensure that no small businesses are worse off under these changes.
There will be no change to capital gains tax rules on existing assets and personal superannuation, and the family home will remain CGT free.
Labor will consult with industry, relevant stakeholders and State governments on further design and implementation details ahead of the start date for this policy.
Labor’s ‘Funding Health & Education – and Balancing the Budget’ is smart policy that is decisive, takes the lead on tax reform, and will ensure that both the future of our health and education system is secured, and that there is more fairness for working and middle class people entering the property market.
This is one of the most important things we can do for the future of our children, our country and our economy.
Labor will not be like Malcolm Turnbull’s Liberals, floating thought bubbles and then weakly waffling away from them.
Malcolm Turnbull’s Liberals do not have a clear idea about what they are doing with the economy.
Labor does – we are announcing positive policies like our ‘Your Child. Our Future’ plan for schools, explaining why they are needed to secure Australia’s future prosperity and how they will benefit middle and working class families.
And unlike the Liberal Government, we are telling people exactly how we will pay for these important policies – every one, every time.
The independent Parliamentary Budget Office has costed the impact of this policy as improving the budget by $565 million over the forward estimates, and $32.1 billion over the decade.
This structural reform adds to existing Labor proposals to improve to Budget, including making multinational companies pay their fair share of tax, reducing superannuation tax concessions for millionaires, increasing the changes to tobacco excise, ceasing the Emissions Reduction Fund, and not proceeding with the Liberals’ new baby bonus.
More detail about Labor’s announcement can be found here.
Senator Katy Gallagher is Labor's Shadow Minister for Mental Health, Shadow Minister for Housing and Homelessness and the Shadow Minister Assisting the Leader on State and Territory Relations.
This is a joint release with Federal Labor Leader Bill Shorten MP and Labor's Shadow Treasurer Chris Bowen MP.
SATURDAY, 13 FEBRUARY 2016