Tax concessions for property investors will cause a $20 billion-a-year headache for the government budget within a decade and will massively benefit high-income earners, new research has found.
The huge jump in the cost of fiscal advantages also plays as interest rates are skyrocketing which means the amount homeowners can deduct for negatively geared properties will continue to increase.
Modeling by the independent Parliamentary Budget Office (PBO) – commissioned by Greens leader Adam Bandt – estimated that with interest rates currently at 2.85%, this would result in a loss of $12.7 billion budget revenue in 2023-2033.
However, if interest rates hit 3.35% – which the Reserve Bank of Australia has announced – that cost would skyrocket further to $13.8 billion.
Negative gear only cost the budget $3.8 billion last year.
The numbers get even worse for the combined revenue from negative debt and capital gains tax benefits, which totaled just $8.5 billion in 2021-22.
Yet the amount of revenue missing from both measures over the next decade will reach $157 billion, including $97 billion from negative debt as interest rates rise and $60 billion from debt cuts. capital gains tax.
Last year’s analysis also found that 56% of the value of the two tax breaks will go to the top 10% – those earning more than $1,189,000 a year, while 36% of those earning more of $129,200 receive negative benefits from the gear.
That means the average real estate investor can claim around $4,640 in tax breaks by the end of the decade.
Max Chandler-Mather, Greens housing spokesman, said both tax breaks unfairly benefit high-income earners and should be scrapped.
“The higher interest rates rise, the more negative debt will cost the budget, which means that just when the government needs additional revenue to help alleviate the cost of living crisis, it is putting it back under form of tax breaks to wealthy real estate investors,” he said.
“Negative gearing and capital gains tax cuts work together to artificially inflate property prices and inflate inequality, funneling tens of billions of dollars into the pockets of Australia’s top 10% earners. .
“These tax advantages alone mean that it is often easier for a real estate investor to buy their fifth home, than for someone to buy their first home, and that is deeply unfair.”
Yet the bottom 50% earners — those earning less than $51,500 a year — accounted for less than 4% of lost income due to the capital gains tax cut.
It also accounted for less than 16% of the negative gear benefits, the analysis also revealed.
However, a loss of income of $20.4 billion would result in a flow of $11.4 billion for those earning more than $189,000 a year.