Existing property investors can breathe a collective sigh of relief (and perhaps adjust their monocles), as Treasurer Jim Chalmers has signaled that any changes to capital gains tax in next month's budget will likely spare them from paying more. Speaking on the CommBank View podcast, Chalmers said he wanted to "make sure that we recognise the decisions that people have taken in the past," which is code for "we're not going to retroactively make you sad." He also dampened expectations of a revenue windfall, noting that even if reforms go ahead, people "shouldn't expect there to be this huge amount of new revenue show up over the course of the next few years."
The government is widely expected to tweak the flat 50% tax discount on profits from assets held over a year, possibly returning to the pre-1999 model where capital gains are adjusted for inflation. Negative gearing is also in the crosshairs. Investors and experts have predictably called for any changes to only apply to new investments - because nothing says "fairness" like grandfathering in the old rules for those who already benefited.
The Grattan Institute, never one to let a good tax break go unscrutinized, calculated that halving the CGT discount and phasing it in over five years would generate $6.5bn a year for the budget. But the Parliamentary Budget Office found that applying changes only to new investments would yield a fraction of that - essentially, a rounding error in government math.
Chalmers also admitted that scaling back tax breaks for landlords won't necessarily make homes cheaper, but could rebalance the "composition" of home ownership away from investors and toward owner-occupiers. "We're not trying to target a certain change necessarily in price," he said, which is a refreshingly honest way of saying "we're not promising lower prices, just different people owning things."
Economic modelling suggests changing tax settings could lower home prices by 1% to 4% and lift home ownership rates by three percentage points - modest gains, but hey, every percentage point counts when you're trying to appease voters. Chalmers concluded that boosting housing supply is "the main game," because building more homes is apparently the radical solution to not having enough homes.