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‘Too long': Plan to crack huge housing hurdle

‘Too long': Plan to crack huge housing hurdle

Perth Now21-07-2025
Thousands of new houses could be built in the next five years with tweaks to tax rules that Labor has resisted 'for too long', experts say.
Increasing tax breaks for investors in new properties is needed for Australia to meet its 'ambitious' 1.2 million home target by 2030 according to a new research paper by The McKell Institute.
Four tweaks to capital gains tax – including an increase to the 50 per cent discount for new units but a reduction on discounts for detached dwellings – are being put forward as a 'circuit breaker'.
The paper will be submitted to the federal productivity roundtable forum, which Treasurer Jim Chalmers is promoting as a way to build consensus on long-term economic reform.
'Labor has resisted change to the CGT discount for too long,' McKell chief executive Edward Cavanough said.
'The CGT tax discount is neither good nor evil, but it should be better calibrated to actually achieve our social aims.' Experts are split on the best way to build more houses. NewsWire / Flavio Brancaleone Credit: News Corp Australia
'Instead of encouraging property investors to bid up the price of existing housing stock we should be encouraging them to contribute to the construction of new dwellings.'
Capital gains tax is paid when you buy an asset and then later sell it for a profit; the profit you make is taxed as income.
The capital gains tax discount kicks in when, if you own an investment property for 12 months and then sell it, you only pay tax on half the profit you made.
The richest 10 per cent of Australians reap the benefits of more than half the capital gains tax discounts, government data shows.
Sale of the home you own and live in is exempt from capital gains tax. Federal Treasurer Jim Chalmers will lead the roundtable meetings in Canberra next month. NewsWire / Martin Ollman Credit: News Corp Australia
The plan projects up to 130,000 extra new homes could be built by 2030.
'A key problem with our existing tax settings on property is they orient too much investment toward established dwellings at the cost of new supply,' Professor Holden said.
'There is nothing wrong with the commonly held desire of everyday investors to secure their future by investing in the housing market.
'But this desire should be harnessed to achieve our national objectives on housing supply.'
The federal government has set a lofty goal of 1.2 million new houses being built by 2030 that would require 220,000 new dwellings per year. About 160,000 new homes are built each year.
The monthly new home target has been met just once since the target was set in early 2023, and even the federal Treasury has suggested the target will not be hit under the current policy settings.
In tune with the McKell research, a group of rank-and-file Labor members has also thrown their voice behind a proposal to curb the tax discounts, with Labor for Housing saying a reduction in the discounts would help build more houses.
Mr Chalmers has billed the roundtable meetings as a chance to set in motion aspirational reform.
In June, Mr Chalmers said changes to capital gains tax was not something the government was 'looking at right now' but acknowledged there was appetite.
'I think it is really important we don't narrow that, limit that, those ideas people put forward. We've had a view about that in the past. I do suspect people will raise it, and we'll listen respectfully when they do,' he said.
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