Inside the Labor Party's bold push to increase taxes on property investors: 'Government now has a mandate to rectify inequity'
Former Labor leader Bill Shorten lost the 2016 and 2019 elections with a plan to halve the 50 per cent capital gains tax discount to 25 per cent.
The lesson of those election defeats led Albanese to rule out tinkering with capital gains taxes after he took over as Labor leader, and he went on to win the 2022 election and was resoundingly re-elected in May.
But now a grassroots organisation within the Prime Minister's own party – Labor for Housing – wants the 50 per cent capital gains tax discount scrapped entirely, not just diluted.
That meant someone who made a $100,000 capital gain on their investment property would be taxed on the entire increase, not just $50,000 of it.
Labor for Housing co-convener Julijana Todorovic told Daily Mail Australia the 50 per cent capital gains tax discount for selling residential properties introduced in September 1999, needed to be dismantled.
'We think it should be removed entirely, so not immediately,' she said.
'Property should not be an investment for which you can claim the discount.'
Ms Todorovic, a land rights lawyer, said the Albanese government should change policy before the next election campaign.
'Our view is that the Labor government now has a mandate to rectify inequity in Australian society,' she said.
'While it's clear from the election results that we can't be too radical, we must do something to stem the flow of generational inequity.'
She argued the 50 per cent capital gains tax discount should be grandfathered for existing investors but scrapped for future purchases - a position the Greens took to the May election.
'We are proposing that residential property is removed as a category for which the discount can be claimed,' Ms Todorovic said.
'But we're proposing that this change is grandfathered to a certain date – so if people have structured their finances based on the discount, then they will have time to restructure – they won't be left high and dry.'
Labor for Housing argued that scrapping the discount for properties would encourage investors to invest in technology and businesses, rather than putting all their funds into real estate and thereby driving up the country's massive house prices.
'Australia's capital resources have become landlocked by a CGT discount on property,' it said in a submission to the government's August Economic Reform Roundtable.
'As Australia electrifies, transitions to renewables and increases our data capacity, businesses are struggling to find adequate capital.
'By incentivising investment in the productive powers of the market, the government can increase the circular flow of capital in the economy, creating jobs and additional economic activity.'
The Greens went to the last election with a plan to scrap the 50 per cent capital gains tax discount for future purchases of investment properties, and grandfather it to one property for those who already owned an investment property.
While Labor has a landslide majority in the House of Representatives, it just needs the Greens to get its legislation passed in the Senate without the need to win the support of other crossbenchers.
The Labor-aligned McKell Institute has called for the federal government to reduce the 50 per cent capital gains tax discount to 35 per cent for existing investment properties with a backyard.
This means $65,000 of a $100,000 capital gain would be taxed, up from $50,000 now.
But it has also called for the 50 per cent capital gains tax discount to be increased to 70 per cent for newly-built apartments, arguing this kind of policy would boost housing supply and encourage more off-the-plan unit developments.
That means only $30,000 of a $100,000 capital gain would be taxed - and force more Aussies into apartments rather than homes with a backyard as Labor aims to build 1.2million homes over five years.
The McKell Institute's Harnessing Aspiration report argued the existing 50 per cent capital gains tax discount encouraged investor speculators to buy up houses at a time when there is a shortage.
'There is a unique incentive for investors to speculate on existing detached houses rather than non-existing off-the -plan attached dwellings or established attached dwellings,' he said.
'The blanket tax treatment of each of these asset types means an investor is much more attracted to high-growth existing detached dwellings than moderate-growth attached dwellings, especially new builds.'
The average, full-time worker earning $102,742 a year is priced out of buying the median-priced house in every state and territory capital city except Darwin.
Ms Todorovic said Labor for Housing's call to scrap the 50 per cent capital gains tax discount was not about stopping property speculation, but merely to have it treated the same way as other forms of speculative investment.
'It won't – this isn't the tool to correct speculation, this is about removing incentives which preference land above other more productive investments,' she said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Daily Mail
3 minutes ago
- Daily Mail
Radical tax and retirement proposal that could affect every Aussie: What you need to know
Public servants within Anthony Albanese 's own government have suggested access to the age pension needs to be wound back for wealthy baby boomers because it's too costly. The Department of Social Services - in an incoming brief to new Social Services Minister Tanya Plibersek - suggested lower-income Australians were paying for the lifestyles of the rich, who were living off the age pension under existing rules exempting the family home from the assets test. 'Low-and-middle income taxpayers are subsidising the retirement incomes of seniors with significant wealth in addition to their homes,' it said. The departmental brief, prepared independently of the new Labor minister's office, noted couples could still receive the age pension even as they continued to earn six-figure annual incomes from their investments. 'Age pension continues to be payable to couples with income of almost $100,000 a year or assets of almost $1.05million, in addition to their principal home of unlimited value,' it said. The department said this was unfair compared with the treatment of the unemployed, who had to wait 13 weeks to receive JobSeeker if they had more than $11,500 in the bank. A spokeswoman for Ms Plibersek said the government had no plans to impose a stricter assets test for the age pension. 'The government appreciates independent, frank and fearless advice from its agencies,' she told Daily Mail Australia. The Department of Social Services - in an incoming brief to new Social Services Minister Tanya Plibersek (pictured) - suggested lower-income Australians were paying for the lifestyles of the rich, living off the age pension under existing rules exempting the family home from the assets test 'The government has no plans to include the family home in the pension assets test.' This is despite Treasury forecasting an 'expected increase in the number of age pension recipients as the Australian population ages'. More than $109billion is set to be spent on aged care in 2025-26 as government spending as a proportion of the economy hits the highest level since 1986 outside of Covid. Capital gains tax discount Ahead of the government's Economic Reform Roundtable next month, Westpac chief economist Luci Ellis has suggested scrapping the 50 per cent capital gains tax discount, introduced in 1999, because it fuelled property market speculation and made houses unaffordable. 'There is a lot of prior work pointing out the incentives to speculate in property created by discounted CGT,' she told Daily Mail Australia. 'The issue is that discounting CGT, as currently, means that people would rather have capital gains than cash income from an investment. 'So it means people are better off from a tax perspective buying an existing property than investing in a business or some other productivity-enhancing investment.' Ms Ellis, a former assistant governor at the Reserve Bank of Australia, has proposed replacing the 50 per cent capital gains tax discount with indexation fixed at 2.5 per cent, or the mid-point of the RBA's two to three per cent inflation target. 'This is easier to calculate and doesn't require people to know the history of inflation to calculate their tax liability,' she said. 'My proposal to instead charge full marginal tax rate on CGT will eliminate the incentive to favour capital-gains-producing investments over productivity-boosting ones.' Ms Ellis' call to axe the 50 per cent capital gains tax discount, on behalf of Westpac Economics, is shared by grassroots group Labor for Housing and the Greens. She put that view last week to teal MP Allegra Spender's tax roundtable in Canberra, but Labor had ruled out that option in Opposition after losing the 2016 and 2019 elections with that policy. Her call on the capital gains tax is not the view of the Westpac Banking Group, which is this week putting in a separate submission to the government's Economic Reform Roundtable. With only deficits forecast in coming years, the Department of Social Services noted funding welfare for the elderly would be a financial challenge, with the proportion of Australians older than 65 increasing by 31 per cent since 2000. Almost two-thirds, or 65 per cent, of people aged 65 and over receive income support payments, with 92 per cent of them getting the age pension. Australians can access the age pension at 67. 'Australia's demographics are evolving and will have broader implications for fiscal and social policy and demands for services,' the department said. 'Life expectancy is rising, and fertility rates are declining, reducing the working age population and influencing family composition and structures.' The department also suggested Australia would continue relying on high immigration so there was tax revenue from a working age population to support older Australians. 'Overseas migration is expected to continue to support population growth, offsetting demographic and economic challenges to some extent, as higher immigration correlates with higher tax revenue and increases in working-age population,' it said. Unaffordable housing was likely to see younger generations become increasingly reliant on their parents for housing. 'Concerns of intergenerational inequalities are growing, and young people's circumstances are falling short of their expectations,' the Department of Social Services said. 'As more rely on family for financial support and/or housing well into adulthood, they experience delayed milestones including education, employment, family, and home ownership. 'Many also struggle with compounding and competing responsibilities of paid employment and unpaid care. 'This has implications on household incomes, workforce participation, gender equality, and may have greater social, economic, and intergenerational ramifications.'
Daily Mail
3 minutes ago
- Daily Mail
Could I give £250 gifts to 400 people who then pay them to my daughters to beat inheritance tax on £100,000?
I am one of the people that will be adversely affected by Rachel Reeves' unwarranted raid on unused pension pots. Currently, this change will mean an additional inheritance tax charge of about £270,000 for me, if I died. I have been looking at the gifting rules and the sums you can give away are measly, £3,000 each year, or unlimited £250 gifts but only one per person. However, if I can gift £250 free of IHT to as many people as I wish, could I do that and then those people all give the money to my two daughters? So, could I gift a total of £100,000 to 400 different people and they each in turn make £250 gifts to my daughters, giving them £50,000 each and thus avoiding inheritance tax? R.J, via email Harvey Dorset, of This is Money, replies: Recent changes mean that considerably more people are in line to incur inheritance tax bills on their estates in the years to come. Pensions are set to fall into the inheritance tax net from 2027, meaning that many will find their estate is worth well above the inheritance tax allowance. Inheritance tax receipts recently increased to £8.2billion from April 2024 to March 2025, more than £800million higher than the same period a year before. One of the main ways to go about reducing a potential IHT bill is to make the most of gifting allowances to lower the value of your estate. However, the current gifting allowances have been in place since the mid 1980s, with a maximum total annual inheritance tax-free gift limit of £3,000. This has made it all the harder to meaningfully reduce the size of an estate by using this allowance. On top of the £3,000 annual allowance, which can only be given to one recipient, the rules stipulate that you can give as many £250 gifts to whomever you like. This is where your novel solution comes in. If you can find 400 willing participants – something I dare say you might have trouble with – why can't you give them each £250 to then gift to your two daughters? Unfortunately, as David Denton, tax expert at Quilter Cheviot, discusses below, you might not have found the genius solution that you might think. Luckily though, there are other options that might be available to help you pass your wealth to your two daughters. David Denton, tax expert at Quilter Cheviot, replies: As the tax burden hits a recent high and rumours swirl of more tax rises to come, it is understandable that consumers may wish to find ways to reduce their tax bill. However, the tax authorities are rightly switched on to the potential for abuse of the system and people finding what they think to be new and novel ways to avoid tax. Some may be legitimate but for the vast majority they are likely to cause more problems than it is worth. The UK introduced the 'General Anti–Abuse Rule' (GAAR) in 2013 and this is designed to target those taxpayers who avoid paying tax in ways that are not in the spirit of the rules, despite some aspects being potentially legal. Abusive arrangements can include as a series of pre–ordained steps, where HMRC would look at the overall effect of the series or combination of transactions in order to identify the real purpose. The GAAR applies to a number of personal taxes, including inheritance tax, so if enough tax was at risk, it could come into effect here given there is a pre–planned element and involves a number of people. Instead you should be looking at how they can use the rules to still make substantial gifts. For example, should you expect to live for another seven years then it may be worth making a gift above the £3,000 limit as a potentially exempt transfer. After seven years of being gifted these assets will no longer be taken into account on death and be free from inheritance tax. There are other possibilities for exempt gifts, such as marriage gifts, which can be up to £5000, according to the relationship between the donor and recipient. Finally there is also the option of making gifts out of surplus income, where the gift is part of your normal expenditure and leaves you able to maintain your usual standard of living. These gifts can come from salary, dividends, pension income or rental income, so it does give you some options that are very much within the rules of the UK tax system.
Daily Mail
3 minutes ago
- Daily Mail
Will I lose the Winter Fuel Payment if I make a pension withdrawal to replace my 'clapped out' car?
I read your article about the Winter Fuel Payment and the HMRC limit of £35,000. I have a small private pension plus my state pension. I now need to draw a lump sum of money from my pension pot, which I built up for nine years during self employment, to replace my 'clapped out' car. This could take me over the £35,000 income for the year. Do I now need to return my Winter Fuel Payment? We can't really afford to take out a loan for the car, nor would we want to with sufficient funds sitting in my pension pot. Am I now to be punished once again for putting things in place for my old age? Steve Webb replies: If your total income from your state pension, regular private pensions and lump sum pension withdrawal takes you over the £35,000 limit, then yes, your extra tax bill next year will wipe out the value of your share of this year's Winter Fuel Payment. However, it is worth remembering that, assuming you and your partner are under 80 and not receiving benefits, you are probably each receiving an equal share of the total £200 Winter Fuel Payment. It is only your share (typically £100) which is at stake if your income goes above £35,000, rather than the total household payment. There are some further aspects of this which might be worth bearing in mind. The first is that what affects your WFP is your individual income, not the combined income of you and your spouse or partner. This means that if your partner had access to a pension pot or other savings and could do this without taking their income above the £35,000 limit, then the car could be purchased without affecting the payment at all. Alternatively, if your partner was able to make some contribution to the car, but not the full amount, another option would be for you to chip in by taking a smaller pension withdrawal to 'mop up' any spare income between your current annual figure and the £35,000 limit. You could do this without affecting your WFP entitlement. Depending on the state of your 'clapped out' car, another angle to think about is whether you could hold on until the end of this tax year. If so, you could take your withdrawal in two lumps, one before 6 April 2026 and one afterwards. Provided each individual lump kept you within the limit, then your WFP would be unaffected. How do you send back a Winter Fuel Payment? Turning now to your comment about 'returning' your WFP, it's worth being clear how the process will work from this winter onwards. Under the new system, everyone who is over state pension age should be paid a WFP in full, regardless of their income. HMRC will then identify at the end of the year those individuals who had income over £35,000 and will add an amount to their tax bill to offset the WFP they received the previous winter. So you are not exactly 'returning' the WFP, you are simply facing a slightly higher tax bill next year. If you prefer, the Government has said that it will be possible, in principle, to opt out of the WFP system. But in your situation, where your income is only temporarily over the limit for one year, it's hard to see what you would gain by doing this. It would probably be far simpler to simply get a WFP, put it in the bank and earn a bit of interest, and then use it to help pay your increased tax bill for one year. If you are determined to avoid this situation you could in principle opt out this year, and then (presumably) opt in again the following year, but we have yet to see any details as to how all of this will work and how bureaucratic the whole process will be. Ask Steve Webb a pension question Former pensions minister Steve Webb is This Is Money's agony uncle. He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement. Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock. If you would like to ask Steve a question about pensions, please email him at pensionquestions@ Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes. If Steve is unable to answer your question, you can also contact MoneyHelper, a Government-backed organisation which gives free assistance on pensions to the public. It can be found here and its number is 0800 011 3797.
