There’s no fair go in any system that favours the haves over the have-nots, writes Col Harrington
Courier-Mail 11 01 2010
Attempting to introduce debate on taxation policy at an ALP conference is akin to bringing ribbons of garlic to a gathering of vampires. Nevertheless, at the recent ALP Northside Regional Conference, tax was discussed at some length but perhaps given the older and surprisingly conservative audience, no great initiatives or radical plans came out the other side.
What most amazed me was that the idea of a Labor Government reducing the existing generous capital gains tax concessions to property investors was roundly condemned. Apparently, to lower it from a 50 per cent tax-free rate to 25 per cent was a bracket too far, even when coupled with a proposal to make the interest on mortgages tax deductible for first home buyers for the first five years.
And if rank-and-file ALP members can’t see the justification for making home ownership a more level playing field, what hope is there for lower income earners and first home buyers? Consider the way the deck is stacked in favour of older, wealthier Australians to gather up real estate. If you buy an existing investment property in Australia and you own it for more than 12 months, for every $10,000 you make in capital gains, $5000 is tax free.
According to a report by The Brotherhood of St Laurence, 17 per cent of Australian households own rental properties. Of these, 40 per cent of the top 20 per cent of income earners were represented and a disproportionate number of these were older higher-income earners.
Galloping house prices benefit owners over those trying to buy their first home and generous tax treatment encourages speculation at the cost of more productive investment. The average mortgage has now reached $354,000. The way negative gearing is structured, higher-income earners can claim a tax deduction for the difference in rents received versus interest and other expenses paid on investment loans and then get a 50 per cent discount on the capital gains tax to be paid when the property is sold.
Is it me, or is this just plain wrong? We have always had an ethos of egalitarianism, otherwise known as giving everyone a ‘‘fair go’’. The present system is not fair. Any system that favours the haves over the have-nots is anathema to me and everything that I ever understood the ALP to be about. Perhaps the much awaited Henry Review being undertaken by the Treasury head into Australia’s tax system will find something to redress the imbalance.
But will the Rudd Government have the political will and the acumen to persuade wealthier property investors that it is in Australia’s long-term interest to accept the tax concessions that have favoured them must be wound back if young home buyers are to be given the opportunities to own the roof over their head?