Working Australians will be locked out of home ownership unless the government winds back property tax breaks, a major union body has warned.
As the federal government seeks ways to reinvigorate the nation’s languishing productivity, the Australian Council of Trade Unions has urged the government to reform the tax system and make housing affordable.
Tax concessions like negative gearing, which allows investors to claim deductions on losses, and the capital gains tax discount, which halves the amount of tax paid by those who sell assets owned for a year or more, have incentivised property investment and tied up capital that could otherwise be invested more productively, according to the union.
“Working people can no longer afford to live near where they work and young people are locked out of the housing market and locked into high rents,” ACTU secretary Sally McManus said.
“It’s just not right and has to change.”
The union has proposed limiting negative gearing and capital gains tax discounts to a single investment property, though those tax breaks would be grandfathered for five years on properties that already benefit, giving investors time to adjust.
But such reforms have historically been political kryptonite for Labor, with a proposal to limit negative gearing contributing to its narrow defeat at the 2019 election.
Even in the aftermath of its significant election win in May, the party has largely avoided the topic and attempts at tax reform in recent years have been met with vocal opposition.
The government’s bill to lift taxes on super balances above $3 million from 15 per cent to 30 per cent has proved controversial among industry giants and the coalition.
But Ms McManus insisted the system needs to change.
“We’ve got to bite the bullet,” Ms McManus told ABC’s Insiders on Sunday.
“Otherwise we’re just saying, ‘too bad young people, you’re not going to be able to ever own a home’.”
The union has also urged the government to implement a minimum 25 per cent tax rate for individuals who earn more than $1 million and for family trusts.
Labor is preparing to host an economic roundtable later in August that will focus on lifting living standards by improving productivity, building resilience and strengthening the budget.
Unions, business representatives and a host of government and economic figures have been invited to offer their answers.
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