Housing affordability is a prominent issue. I know my kids can’t afford to buy their first home in Aston, in fact they may need to head to remote areas to be able to afford a property. The challenge for our kids, is that they can’t really afford to rent in Aston either. Things need to change – but the answer is not as complex as the major parties want to make it.
To address this challenge, I propose a straightforward solution. To assist individuals transitioning from renting to home ownership, we need to mitigate the rising costs of residential properties. As more people move out of the rental market and into home ownership, we will observe a decrease in pressure on rental prices, ultimately leading to stabilization and reduction as vacancy rates increase.
It is important that we understand and respect that we still need to provide good quality rental properties in the market. My plan is to bring house prices down to make them affordable, but to maintain good rental properties for those that do not want to buy a property. I understand that people move for work or study. They don’t want to live there for ever and need to rent.
To achieve these objectives, I will implement the following reforms.
Negative Gearing
Negative gearing is an important source of rental properties; however, it is also a source of heat for increased housing prices. The current policies of the major parties are all or nothing – Greens – will totally axe it, whilst Liberals have vowed to keep it and well Labor – have said they will keep it but… who really knows with them on this issue.
I propose that the following changes be made to negative gearing.
1. Individual Australian Residents are capped at two properties per person.
2. Foreign ownership of Australian residential properties is not eligible to claim negative gearing. This is foreign owned companies (including foreign owned parent and subsidiary companies and foreign individuals.
3. Dual citizens and ex-pat Australians would also be ineligible to negative gear properties.
4. Australian owned companies and businesses would be able to negative gear at 50% value of the interest from the property.
5. Properties without a rental return i.e. properties bought for family members to live rent free will not be eligible to negative gear.
New Residential Property Tax
Foreign owned residential properties as defined in point 2 above, will attract a 60% tax on earnings from residential properties. The aim is to remove foreign ownership of residential properties. This tax will not be applied to Australian residents or Australian owned companies. We still need to support the rental market.
Capital Gains Tax
I am proposing changes to the Capital Gains Tax to reward investors who have supported the rental market. I will tackle the speculative investors who are buying and selling properties to make money of property price gains. This will reduce the heat on property values which contributes to putting properties out of reach for younger Australians and First Home Buyers.
I will increase Capital Gain Tax to 60% for properties that are bought and sold within a 10-year period. There will be no per property threshold for these properties. There will be exceptional circumstance exemptions such as needing to be sold due to illness, relationship breakdown and death, which means that the tax rate will be at the individuals tax rate.
For properties that are owned for more than 10 years but less than 20 years the capital gains tax will be at the individuals tax rate with a 20% tax with a $100K threshold per owner available.
For properties owned for more than 20 years – 0% tax would be payable.
This plan will see properties returned to the market from foreign residential property investors and foreign owned companies. This will remove market pressures from speculative buyers who are out to make a quick profit with no consideration to the rental or first home buyer’s market. Most importantly this will incentivize the Mum and Dad investors to provide long term rental properties with their investment providing a secure retirement option.
The changes to the negative gearing will significantly provide a cost saving for government which will more than adequately cover the cost of the capital gains tax, and the saving will also contribute to funding my proposed HECS changes.
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