Homeowners can breathe a sigh of relief, with the Rudd government rejecting capital gains and land tax reforms proposed in Australia's Future Tax System Review on Sunday, 2 May.
A number of property related recommendations were advocated by Treasury chief Ken Henry in his review of the Australian tax system, such as reducing stamp duty and increasing land tax, and expanding land tax to eventually include all land. However, the government has rejected a number of these proposals, announcing there will be no cuts to CGT concessions or negative gearing deductions, and no land tax applied to the family home, adding that land tax will remain "an issue for the states".
Residential Development Council (RDC) executive director Carolyn Kakas said the preservation of CGT and negative gearing deductions was a wise decision. "Investors in the housing market are essential," she said. "With a commitment to leave this tax offset untouched, it’s clear government agrees. Negative gearing, the primary tool for middle Australia’s wealth creation, will be maintained. It provides the backbone for affordable rental accommodation in Australia and its removal would have further eroded the availability of rental housing across the country."
However, Housing Industry Association (HIA) managing director Shane Goodwin said more concrete confirmation was needed from the government. "The Henry Report makes recommendations on land tax, stamp duty, negative gearing and CGT that haven’t been addressed in the government’s response," he said. "The government’s response still leaves many of the issues affecting residential properties unresolved. The government’s response requires clarification so as to put the question of property tax treatment to bed, raising confidence in residential investment."
Many of the review’s recommendations were endorsed by the government, with an increase to workers’ superannuation, cuts to company tax and the introduction of resource tax for major mining companies.