Unions, industry groups clash over tax reform at senate inquiry

The issue within the limitation of negative gearing and the blanket 50 per cent CGT discount, Martin said, is the assumption that investors will simply redirect money into new builds.

“In reality, housing competes with shares, commercial property, term deposits and countless other investments,” she said.

“The result will be fewer projects proceeding, fewer homes being built, and even greater pressure on affordability.”

It was further suggested that this may be especially apparent in regional areas where smaller investors play a central role in housing supply.

In opposition, the Australian Council of Trade Unions (ACTU) has campaigned for the immediate and urgent legislation of the reforms to rid younger Australians of current laws that have made home ownership impossible.

Speaking at the Senate inquiry on 16 June, the ACTU said that the proposed tax changes would address the 10 per cent point decline in home ownership since 1966, caused in part by overly generous tax concessions that saw fewer younger Australians in the housing ladder.

“Until the tax system stops rewarding wealth more than work, younger households will be left with a fraction of the assets of older generations while being saddled with more debt from higher property loans,” according to ACTU assistant secretary, Joseph Mitchell.

“Young people shouldn’t need to gamble on crypto just to be able to afford a home deposit, as some commentators claim.”

“These tax bills are positive reforms to make work respected, not penalised, and to treat housing as a place to live, not a tax-advantaged vehicle for speculative gain.”

However, the HIA said that “while increasing home ownership is a worthwhile goal, it does not increase the number of homes - it simply redistributes them”.

The industry group suggested the reforms not only fail to directly target supply, but also ignore the role of diverse housing supply pathways, such as knock-down rebuilds and medium-density developments.

Martin said: “A knock-down rebuild that replaces an ageing home with a modern, energy-efficient dwelling should be encouraged, not penalised.”

In this way, Martin urged policymakers to consider whether any changes to the system will actually deliver more homes, especially in light of Australia already being behind schedule to meet the National Housing Accord target of 1.2 million new homes.

The HIA has called on senators to reject the proposed and so-called “unrealistic” measures.

However, the ACTU maintained that the changes would help younger and working Australians, and cited findings that three-quarters of total CGT benefits in 2019–2020 were received by the top 10 per cent of taxpayers, and in 2022–23, 54 per cent went to the top one per cent.

Similarly, the union collective highlighted its support for further cost-of-living relief, including the Working Australian Tax Offset, instant tax deduction, and changes to discretionary trusts.

Mitchell said: “Combined with tax cuts that hand back money to low and middle-income Australians, these tax reforms are a critical first step towards restoring fairness to the tax system.”

The committee is due to hand down its report on 22 June, which, as recently reported, has itself garnered significant criticism from bodies including the National Tax & Accountants' Association and Financial Advice Association Australia for seemingly rushing the process and limiting public consultation.