PIPA wants negative gearing AND CGT left alone

The Property Investment Professionals of Australia (PIPA) is warning the Albanese Government against changing negative gearing and capital gains tax concessions, claiming it could cost up to $58 billion over 10 years.

PIPIA says such changes would also drive investors out of the market in droves.

The federal government earns billions of dollars in tax from CGT every year, with the Australian Tax Office reporting about $26.4 billion in individual real estate capital gains in the 2020-2021 financial year.

PIPA board member Peter Koulizos said his research also showed the benefits of negative gearing were not as generous as the government liked to imply.

“Investors already pay more than six times in capital gains tax than what they receive in negative gearing benefits over a 10-year period, so, the government is well ahead financially as it is.”

PIPA modelling’s found an investor who bought a $925,000 property today could potentially receive $20,415 in negative gearing benefits over a decade but could pay about $116,336 in capital gains tax when they sold, leaving the government with a $95,921 net gain.

The modelling found, over 10 years:

If investment activity reduced by 15 per cent, there would be 499,000 fewer rental properties and a $58 billion loss of capital gains tax revenue

If investment activity reduced by 10 per cent, there would be 333,000 fewer rental properties and a $38 billion total loss of capital gains tax revenue, and

If investment activity reduced by 5 per cent, there would be 166,600 fewer rental properties and a $19.3 total loss of capital gains tax revenue.

According to the 2023 PIPA Investor Sentiment Survey, 38 per cent of landlords indicated they may sell up in the coming year because recent tax and tenancy reforms made investing an unattractive proposition.

“If Anthony Albanese suddenly adopts a draconian policy like the one Labor took to two elections, I have no doubt property investors will be seriously discouraged from buying property,” PIPA chair Nicola McDougall said.

“When it last proposed these drastic measures, Labor claimed it would incentivise landlords to buy new homes, stimulating supply, but our research shows 93 per cent of investors buy established dwellings.”

Ms McDougall said the government’s belief that fewer investors in the market would mean more first-home buyers was also flawed, with the top barrier to homeownership for young Australians being the ability to save for a deposit and the stamp duty.

“The ability to save a property deposit won’t improve by attacking investors.

“In fact, those hoping to buy their first home will have even less money to save if their rents suddenly skyrocket because of a mass exodus of landlords.

“Saving a deposit for your first property has always been difficult and has been made even more so by soaring interest rates and the tendency for government benefits to focus on new dwellings. That’s despite the data showing more than 80 per cent of first-time buyers choose established dwellings because that’s what they can afford.”