Housing tax breaks here to stay, says Costello Author: By Josh Gordon Date: April 14 2004 Publication: The Age (subscribe)
The Government will not be abolishing tax breaks for housing investors, Treasurer Peter Costello said, as new figures showed thousands of owner-occupiers and first home buyers are being squeezed from the market by rising prices and higher interest rates.
Mr Costello yesterday dismissed reports that the Productivity Commission had recently formed the view that negative gearing and capital gains tax concessions for investment properties were too generous.
"Forget what the Productivity Commission is alleged or not alleged to have said; we are the Government which cut capital gains tax for individuals in half, and that will not change," Mr Costello told Sydney radio.
"If you borrow to go into the business of owning and renting properties, the cost of your borrowing is deductible against your income. Now that . . . will not be changing either."
The twin tax breaks for investors have been partially blamed for the housing price surge that has made houses far less affordable for first home buyers.
The negative gearing tax break allows investors in debt to reduce tax by writing off their operating losses against their income from other sources. Income from capital gains is taxed at only half the rate of income earned by work.
Figures released by the Bureau of Statistics yesterday showed the banks and their smaller rivals issued 50,692 loans to owner-occupiers in February, 4.3 per cent less than the previous month.
It was the fifth consecutive monthly drop, with lending 17 per cent below the peak reached in September last year.
In February, first home buyers accounted for just 12.7 per cent of total lending - a record low.
Labor has ruled out reconsidering the politically sensitive issues of negative gearing and capital gains tax concessions for housing.
But Democrats finance spokesman Andrew Murray promised his party would provide the Senate numbers to whichever party won the election to allow an overhaul.
"The only possible time to address this issue is after the election," Senator Murray said.
The Reserve Bank has also urged "further examination" of the tax treatment of investment housing.
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