Labor’s plan to limit negative gearing to new homes and slash capital gains tax concessions by 50 per cent will have multiple negative impacts and potentially affect the most vulnerable in our community. There will be an adverse impact on rental property affordability if supply is reduced as a result of investors choosing more tax effective investments. And Labor will be hitting average Australians who use negative gearing as a retirement savings plan.

Make no mistake, the average property investor is not a multi-millionaire, it’s a person who owns just one investment property and has an income under $80,000.

Negative gearing presents one of the accessible opportunities for middle-income earners to build wealth for the future. With house price growth anticipated to slow significantly in 2016, and for the foreseeable near future, a 50 per cent reduction in the existing capital gains tax discount could result in many investors seeing real estate investment as too risky. With investors already at record lows in the marketplace, a negative impact on rental housing stock could be a very real risk.

When the Hawke Labor Government abolished negative gearing in 1985, investors and renters, particularly in Sydney and Perth, felt the impact acutely. By 1987, when cabinet was considering the restoration of negative gearing, then Treasurer Paul Keating suggested the 1985 abolition had caused investors to leave the market. The potential outcome of such a policy would be that existing investors will hold properties for longer, making things harder for homebuyers, and we would have one of the highest capital gains taxes in the world.

As First National Real Estate has long argued, the Government should instead abolish Stamp Duty, which is an inefficient and harmful tax that hurts not just homebuyers but the whole economy.