Investor Andrew Morris Advocates for Capital Gains Tax Discount Reduction
Andrew Morris, a retired economist and property investor based in Canberra, has voiced his support for reducing Australia's capital gains tax discount. With ownership of four investment properties across the capital, Morris believes the current 50 per cent discount is excessive and should be lowered to address housing affordability concerns.
Historical Context and Current Debate
The capital gains tax discount was originally introduced by Paul Keating with an inflation-based calculation. In 1999, Prime Minister John Howard implemented a flat 50 per cent discount, simplifying tax calculations but primarily benefiting investors. Morris argues this change has contributed to housing inaccessibility for first home buyers, particularly when combined with negative gearing policies.
"When Keating brought it in, it was inflation-based. I think 50 per cent is a bit too much. It should be less than that," Morris stated, highlighting his perspective on the need for reform.
Potential Impacts on Housing Market
Morris suggests that reducing the discount would likely prompt him to sell properties earlier than planned, potentially freeing up housing stock for younger buyers. However, he cautions that such changes alone may not solve critical supply issues and would only exert marginal downward pressure on house prices.
Economist Matt Grudnoff from The Australia Institute proposes limiting the discount to new builds only. This approach could continue supporting housing supply while discouraging investor speculation on existing properties.
"It may push up the price of new houses, but it will equally suppress the price of second-hand houses. Most first home buyers are not looking to buy brand new homes. They are looking at cheaper houses," Grudnoff explained.
Developer Perspectives and ACT Specifics
Small-scale developer Ben Greentree represents another viewpoint, having moved his investments from Canberra's inner south to Googong due to what he describes as a "double whammy" of taxes. Greentree pays approximately $15,000 annually in land tax on one property, equivalent to what he calls "a trip to Fiji."
Unlike most jurisdictions that offer tax-free thresholds for land tax, the Australian Capital Territory does not provide this exemption. Greentree argues this combination of capital gains tax and land tax creates an unfair burden that discourages private investment in new housing construction.
Industry Concerns About Construction Viability
According to Housing Institute of Australia figures, so-called mum and dad developers accounted for around 40 per cent of new construction nationally last year. These developers differ from larger development companies because they typically hold onto properties they build, making them subject to capital gains tax.
A spokesperson for the institute warned that "higher capital gains tax directly lowers the viability of new home building, particularly apartments, townhouses and build-to-rent projects."
Broader Implications for Renters and Housing Policy
Greentree expressed concern that the current tax structure ultimately harms renters, who comprise approximately 25 per cent of Australian households according to Australian Bureau of Statistics data. He believes the system prevents access to quality rental properties while unfairly taxing investors from multiple angles.
"I believe you should pay something for capital gains, but I think in the ACT you just cop it from both sides. You get capital gains, and then you get land tax, and I don't believe that's fair for me. That's just a cash grab," Greentree stated.
The debate over capital gains tax reform continues as the federal government considers potential changes ahead of the May budget, with stakeholders presenting conflicting views on how best to balance investor interests with housing affordability concerns.
