PM built wealth through negative gearing. Now he’s changing the rules

This article was originally published in the Australian Financial Review.

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The government is clearly attracted to the idea of corporate housing. It is one of the constant themes of Labor’s four years of housing policy.

Labor clearly want to make Melbourne and Sydney look like Atlanta or Jacksonville where 25 per cent or more of the houses are owned by investment corporations.

This is not the Australian dream, but it might be the dream for big unions and super funds aligned to the Labor Party.

This priority has been delivered by stealth and never openly stated.

But the intention and direction of travel is clear: they want to replace Mum and Dad investors with super and institutional capital.

Following the horror budget, there are now three major initiatives to drive corporate housing where Australians perpetually pay rent to major super funds or other institutional investors.

The first was the build-to-rent (BTR) tax concessions.

This policy is a tax cut for foreign pension funds and asset managers which want to build and operate apartments that Australians will never own.

Labor, under the previous parliament, passed legislation approving new tax concessions for investors in BTR developments in Australia.

Then they extended the concession which gave eligible investors in BTR developments access to an accelerated deduction of 4 per cent for capital works, and a reduced withholding tax rate of 15 per cent that applies to eligible fund payments made to a foreign resident from a managed investment trust (MIT).

The government said these developments are specifically designed to be rented out rather than sold to individual buyers. They claimed “it’s a model that has been used successfully overseas to increase housing supply”.

The second was their attempt to force the corporate cop ASIC to change regulatory disclosures to advantage super funds buying houses.

Jim Chalmers received correspondence from super fund CBus in his first year as Treasurer. CBus complained they had to comply with the ASIC regulatory guide 97, which says they must disclose stamp duty costs to members. Shock horror: Cbus wanted to cover this up.

At the post-election Economic Reform Roundtable, Chalmers made this a centrepiece of his agenda. He strong-armed ASIC into consulting on making this change for his mates at Cbus, but was rebuffed by the corporate cop.

ASIC said the aim of regulatory guide 97 is to provide investors with a clear understanding of all costs associated with their investments, including costs like stamp duty, which feeds into APRA reporting standards.

ASIC made clear in a freedom of information document that stamp duty is treated as a transaction cost, which is consistent with other taxes. This means that it should be included in the disclosure of fees and costs in a PDS and periodic statement.

The third and latest plank of the agenda was delivered in the budget stinker in May this year.

Labor announced a plan to chase individual investors out of housing by cruelling negative gearing.

This will remove the ability of Australians to deduct rental losses against their salary income. It suggests investing in rental stock is not productive. In fact, Prime Minister Anthony Albanese has directly stated he does not think this type of investment is “productive”.

It’s hard to believe that investing into housing in a housing crisis isn’t productive, especially when you consider the prime minister has been building his property portfolio using negative gearing for decades.

The really big rock in the pond was the capital gains tax change. The 30 per cent new tax on everything. This means that anyone investing in an asset such as property will pay 30 per cent as a minimum.

Despite the treasurer and prime minister’s claims that this was a reversion to 1999 CGT, the 30 per cent minimum is a brand-new tax.

But here’s the rub. It doesn’t apply to super funds. They have been specifically exempted.

Super funds will continue to pay just 10 per cent on their capital gains. This opens up a gaping 20 per cent differential in tax between individuals and super funds.

Of course, properties in build-to-rent developments “will be excluded” from Labor’s CGT hikes in the 2026-27 budget (budget paper 2, page 21).

This reform establishes a system where tax advantages accrue to super funds but are denied to individuals.

This is the big one. It’s bigger than regulatory guide 97 or build-to-rent because it builds in a large piece of tax arbitrage into the system to bolster super fund ambitions to become landlords.

Chalmers has created a system where the super funds are the biggest winners from his new 30 per cent tax on everything.

Almost everyone and everything will be subject to a new 30 per cent tax, except for the super funds, which will pay 10 per cent.

Of course, former prime minister Paul Keating doesn’t make a sound about this. Keating would be happy as Larry about these new taxes because it locks in a long-term tax advantage for his super obsession.

It’s a king hit on the economy but a massive fillip for Labor’s mates.

It is perhaps the finishing touch on the agenda to make our capital cities full of super fund landlords. That of course, is not the Australian dream.

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