Matt Grudnoff is senior economist at the Australia Institute. He has published widely on a multitude of subjects, including taxation, the federal Budget, poverty & inequality, free trade agreements, housing affordability, energy economics and climate change.
The taxation statistics confirm that a tiny number of people are hoarding an enormous number of homes. They show that just 1% of taxpayers own 25% of all rental properties. Two generous tax concessions have created these conditions: negative gearing and the 50% capital gains tax (CGT) discount.
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In 2023-24, according to the ATO, 90 Australians who earned more than $1m in income paid no tax. The figures also reveal that the changes in the budget targeting the reductions in the discount for capital gains tax and trusts are very much affecting the richest Australians.
Since the Federal Budget, auction clearance rates have fallen and house prices have gone sideways. The slow-down in the housing market is being blamed on interest rate increases, and the Government’s tax changes to negative gearing and capital gains tax announced in the Budget.
If you want to understand the limitations of Gross Domestic Product (GDP) as a measure of wellbeing, then the latest figures for the March quarter are a great example. The overall picture saw the economy grow by 0.3% for the March quarter and by 2.5% for the last year. This shows slow growth but not as slow as some were predicting.
The backlash from vested interests was in full swing this week after the Federal Budget delivered real reforms that will make housing more affordable. They are trying to convince us that young people will be the biggest losers from these changes. The big problem with that is that it is entirely untrue. Young people get almost no benefit from the CGT discount.
Angus Taylor just accidentally proved that the housing affordability crisis has nothing to do with immigration. In his budget reply speech he said “A Coalition government will cap immigration numbers based on the number of homes constructed each year.” But clearly, no one in his office ran the numbers.
It's true that some taxes grow and while others fade away. Here's a look at some of the 'smaller taxes' by how much they are expected to grow over the next 4 years. What's striking is that while Australia is in the middle of a gas price boom, the PRRT is still expected to fall by a third.
We know the amount raised from the beer excise is greater than the PRRT, but the bank levy is also bigger than the PRRT. It's little wonder the head of the Commonwealth Bank has twigged that gas companies are taking the piss.
The government's changes to negative gearing and the CGT discount will reduce the enormous tax concessions that are encouraging people to speculate on the property market. Finally, we have a housing affordability policy that will make a real, positive difference.
Rumour has it that the Labor Government might close a huge tax loophole that rich people have been using for years to avoid paying tax. Apparently, they will create a minimum tax rate of 30% for trusts. Don’t know what a trust is? Don’t worry, you’re not alone - read on.
