A major Australian trade union has issued a call for significant reforms to housing tax breaks, arguing that current policies have “commodified” property and exacerbated social inequality. The Australian Manufacturing Workers’ Union (AMWU) is advocating for the phasing out of the capital gains discount on investment properties and the effective abolition of negative gearing.
The AMWU’s proposal includes replacing the federal government’s 5% home deposit scheme with an initiative that allows renters to allocate a portion of their rent towards purchasing a property. This call for change is part of a broader push by various stakeholders, including the Australian Nursing and Midwifery Federation, who have submitted recommendations to a Greens-led Senate inquiry into the 50% capital gains tax discount introduced during John Howard’s tenure.
Historical Context and Policy Proposals
In previous years, the Labor opposition, under Bill Shorten, proposed reducing capital gains tax concessions and limiting negative gearing. However, the current Albanese government has resisted reviving these plans, maintaining that increasing housing supply is the most effective strategy for addressing the crisis. Despite Treasury modeling changes to these concessions in 2024, the government opted not to pursue them before the last federal election.
The AMWU’s submission to the inquiry emphasizes the need to “reframe” the housing debate, criticizing the transformation of homes into wealth accumulation tools.
“The commodification of houses into a vehicle for accumulating and hoarding wealth has exacerbated inequality and allowed property developers, real estate agents, and investors to profit from denying working people the dignity of home ownership,” the submission stated.
Financial Implications and Expert Opinions
The AMWU suggests that the capital gains discount on investment properties should be immediately reduced and phased out over two years. According to Treasury figures published in December, this discount, applicable when a property is sold after at least 12 months of ownership, is projected to cost the federal budget $21.8 billion in forgone revenue by 2025-26.
The union also advocates for ending the practice of negative gearing, where investors use losses to lower their income tax bills. The AMWU proposes that the revenue recovered from these changes should be redirected to developing Australia’s modular housing industry.
“The economic and social opportunity of home ownership is slipping out of reach for most workers. In fact, without substantial and real changes to our mindset and to policy, a whole generation is going to miss out,” the submission warned.
While the AMWU’s position is more radical than the Australian Council of Trade Unions (ACTU) proposal, which suggested limiting negative gearing and capital gains tax breaks to a single investment property, it aligns with the Greens’ policy during the federal election, which also called for similar restrictions.
Future Prospects and Political Pressure
As the Labor movement prepares for its national conference in Adelaide, the pressure to overhaul housing tax breaks is expected to intensify. The Grattan Institute, a think tank, has also criticized the 50% discount as overly generous and has recommended a phased introduction of a 25% concession over five years. This change could potentially generate $6.5 billion annually, which could be used to support the federal budget, reduce the tax burden on younger Australians, or increase commonwealth rent assistance.
Conversely, the Centre for Independent Studies, a conservative think tank, argues that the 50% discount is “simple and well understood,” suggesting there is no compelling reason for change. The Senate inquiry is set to report its findings on March 17, which could influence future policy directions.
As the debate over housing tax breaks continues, the outcomes of this inquiry and subsequent political discussions will be critical in shaping the future of housing affordability and economic equity in Australia.
