The federal government’s proposed sales tax on investment property has been labelled “disturbing and damaging to confidence” by one industry body.
The government is also said to be discussing potentially lowering negative gearing benefits.
“The suggestion that the Federal Government has plans to introduce a new sales tax on investment housing has all the hallmarks of the disastrous move to introduce a similar tax in NSW in 2004. This tax led to home building in NSW grinding to a halt, a situation from which the state has struggled to recover,” HIA chief executive Graham Wolfe said.
“The Prime Minister or Treasurer must deny today’s media claims immediately before substantial damage is inflicted on home building in Australia.
“Investment in rental property has already slowed to a trickle and the premise that Australia’s housing market needs cooling is deeply flawed.
“The residential construction industry is in the grips of its worst downturn in decades. Residential building activity is forecast to fall to 143,000 housing starts in 2011, down by 15 per cent from 168,700 starts in 2010.”
Mr Wolfe said suggestions negative gearing should be removed are also ludicrous.
“Allowing taxpayers to claim interest expenses on borrowings is entirely appropriate – it is not a tax rort,” he said.
“Income from rental properties is assessable, and expenses should be deductible. This is the basic premise of Australia’s taxation system”.
“In totality, the cost to revenue of negative gearing is less than $2.5 billion per annum, which is around half the amount the Federal Government will raise through its newly introduced flood tax. Yet, despite its small quantum, negative gearing is crucial to investment in rental housing.”