Tax breaks for professional landlords drive up prices and hurt workers

SA Unions want the federal budget to deliver tax changes to make the housing system fairer for workers.

SA Unions Secretary Dale Beasley said that tax breaks for professional landlords have priced working South Australians out of home ownership.

Since the current 50% Capital Gains Tax (CGT) discount was introduced in 1999, house prices have skyrocketed and the gap between prices and wages has widened.

SA Unions are also calling for restrictions on negative gearing tax breaks which worsen the housing affordability crisis.

Sky-high prices mean that workers with a new home loan in Adelaide now spend 53.6% of household income on mortgage repayments. Workers who bear full responsibility for their mortgage are being priced out by professional landlords who can take advantage of taxpayer-funded refunds through negative gearing.

SA Unions are calling on the Federal Government to reduce the CGT discount from 50% to 25% and to limit both the CGT and negative gearing tax breaks to one investment property. These changes should apply to all new investment property purchases, with a five-year grandfathering period so that existing investors can adapt to the new arrangements. 

Background:

Cotality data shows that Adelaide is the second-least affordable capital city in Australia for home buyers: 

• House prices in Adelaide are now 9.8 times household income.  

• On average, it takes South Australian workers 12.3 years to save for a deposit.  

• Adelaide is also Australia’s least affordable capital city for renters.  

• Workers trying to save are faced with rents which have soared 47.8% in five years – more than double the growth of incomes in the same period. 

The 50% CGT discount favours professional landlords who own a large number of investment properties. Treasury data confirms that most of the benefits from the CGT discount flow to the richest 1% of Australians. 

Quotes attributable to SA Unions Secretary Dale Beasley:

“Our tax system isn’t delivering for South Australian workers, who are locked out of home ownership and facing the prospect of renting for the rest of their lives.”  

“Right now, tax breaks for property investors give an unfair leg up to professional landlords who pay lower rates of tax than workers trying to save for a deposit out of their hard-earned wages.”  

“This crisis didn’t happen by accident – it’s the result of a tax system that’s turned housing into a tax avoidance scheme for the richest 1% of Australians.”  

“Limiting negative gearing and the Capital Gains Tax discount to one investment property will make a big difference, without impacting more than 70% of property investors who only own one extra property.”  

“This federal budget is a chance to put people back at the heart of our housing system and to remember that homes are for living in, not just turning a profit.”