Critics of policies from the Howard era argue that the combination of certain strategies sparked a surge in property investment activity. This surge, they claim, pushed property prices to levels unattainable for the average first-time homebuyer, thus continuously favoring the wealthy.

Jim Chalmers, who has been outspoken about addressing intergenerational inequality since his inaugural speech in parliament back in 2013, has these policies in his crosshairs. Any proposed changes would be targeted precisely at balancing this inequality.

However, the Finance Brokers Association of Australia (FBAA) warns that pushing investors out of the market could have unintended consequences, particularly on rental prices. Interim CEO Peter White highlights the current strain on the rental market, noting, “In many parts of Australia, there are 10 to 20 people or more vying for a single rental property due to the current scarcity. So why would we want to further reduce that supply?”

White further critiques the notion that reducing investor perks will significantly lower housing costs to the extent that those unable to afford a mortgage will suddenly find it within reach. He considers this view overly simplistic, as it overlooks the myriad of factors involved in loan approval.

On the other side of the debate, advocates for reform argue that curtailing investor advantages could temper market demand, thus providing first-time homebuyers with a much-needed opportunity to enter the market.

Proponents of reform say removing perks for investors will dampen demand, and give first home-buyers a chance.

Matt Grudnoff, Senior Economist at The Australia Institute, believes tax concessions for property investors have skewed the market.

“The CGT discount is the biggest single incentive for investors,” Grudnoff said.

“By scrapping it, the federal government will advantage first home buyers, helping more Australians into a home of their own.”

Currently, the capital gains discount policy means that if you buy an asset such as a house, hold it for at least 12 months and then sell it, you only pay tax on half the profit (capital gain).

Before 1999, the actual capital gain was indexed to inflation.

Recent polling by the Australia Institute found 50 per cent of respondents agreed the government “should reduce tax concessions for property investors, such as the capital gains tax discount and negative gearing”.

The Greens want to see negative gearing phased out and property-related capital gains tax discounts and exemptions abolished.

The Coalition is firmly against any changes to CGT.

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