Former Labor minister Kim Carr calls for overhaul of negative gearing, tax breaks amid housing crisis

A former cabinet minister and Labor factional powerbroker has declared Anthony Albanese will have little choice but to revisit tax breaks for property investors to stop younger voters from drifting to the Greens, despite the political risks.

Labor in Opposition scrapped plans to dilute the 50 per cent capital gains tax discount and restrict negative gearing to new properties after losing the 2016 and 2019 elections under Bill Shorten.

But former industry minister Kim Carr, from Labor’s Left faction, said the Federal Government would have to examine changing those policies given how unaffordable housing has become for young people.

“You’ll find that the policies we took to the 2019 election will be reviewed over time, particularly around negative gearing,” he told The Nightly. “There will come a time where we will re-examine the value of those policies.”

Mr Carr said Labor also faced losing more younger voters to the Greens on the left, which at the last election campaigned to restrict negative gearing and the 50 per cent capital gains tax discount to one property.

“There is that issue, the demographics of this, but the economics of how we build more houses in Australia,” he said.

Labor suffered swings against it in 2019 with its plan to halve the capital gains tax discount to 25 per cent and restrict negative gearing, or the ability to claim rental losses on tax, to brand new homes.

A lot’s changed and the economic realities require us to re-examine the values of the taxation policies.

Under that plan, someone making a $100,000 capital gain on an investment property would have to declare $75,000 on their tax return instead of $50,000.

Little more than a year after that election loss, the Reserve Bank slashed interest rates to a record low of 0.1 per cent during the COVID pandemic and house prices in capital cities soared by a third over 2021.

Mr Carr said the big surge in house prices since that 2019 election loss meant Labor would have political capital in government to review those housing tax breaks, despite fears this would be electoral poison.

“The concerns around the 2019 election need to be examined against the facts, as distinct against the emotional response they took at the time,” he said.

“A lot’s changed and the economic realities require us to re-examine the values of the taxation policies.”

A Victorian-based pressure group within the party, Labor for Housing, has been campaigning to scrap the capital gains tax discount.

But Gabriel Ng, a former executive member of Labor for Housing who won the Melbourne seat of Menzies off the Liberal Party at the May election, is in no mood to agitate for change.

“I’ve stepped back from my role in Labor for Housing since the election. I’ve been a member of Labor for Housing for a few years, off the top of my head, two or three years,” he told The Nightly.

“I support the policies that we took to the election and so we haven’t proposed any changes to capital gains tax in our national platform and that’s the policy that I support. Of course, we always have voices as backbenchers, but I support the national platform.”

Mr Ng also denied ever supporting Labor for Housing’s push to scrap the capital gains discount.

“That wasn’t a policy that I was involved in developing,” he said.

Senator Barbara Pocock, the housing spokesperson for the Greens, said Labor MPs needed to show some backbone.

“Labor MPs, who have previously supported capital gains tax and negative gearing reform, need to be bold and show some guts in taking a position at odds with the Prime Minister,” she told The Nightly.

“Labor’s unwillingness to scrap or wind back the tax breaks for wealthy property investors will mean young voters will look to the Greens for real tax action.”

Mr Ng, the first-ever Labor member for Menzies, said voters had expressed concern about unaffordable housing in his upmarket electorate which had been held by Liberal since it was created in 1984.

“We had a lot of parents who raised concerns about whether or not their children would ever be able to own a home and move out of home as well as younger people who had the same kind of concerns,” Mr Ng said.

“I recognise that there is a housing crisis, that housing is becoming less affordable for people but also, that the proportion of social and affordable housing is reducing.”

Dorinda Cox, a senator for Western Australia who defected from the Greens to Labor in June, declined to say if she supported changing the 50 per cent capital gains tax discount and negative gearing, despite campaigning in 2022 against “speculators and wealthy investors” in the property market.

Westpac chief economist Luci Ellis has proposed winding back the 50 per cent capital gains tax discount, and simply indexing the capital gain for inflation at a fixed rate of 2.5 per cent a year, to reduce property speculation that has seen house price rises far outpace wage increases.

Australia’s median capital city house price of $1.069 million is beyond the reach of an average, full-time worker on $104,520.

Since October 1, all first-home buyers are unable to get into the market with a 5 per cent mortgage deposit, provided their budget didn’t exceed new price caps, modelled on mid-point house prices in each big city and regional markets.