Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

Here we have, for the second time this week, legislation introduced by the government which purports to be about housing affordability and, in this case, housing tax integrity; but, of course, this is not the case. The Labor Party in this instance will not oppose the passage of the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017 through this House or the other house.

These bills are not objectionable, but what they are is ineffective. These bills are tinkering. These bills are just at the edges, a minor attempt, compared to what is necessary when it comes to reform of negative gearing, in particular. The government talks the big talk and the minister, Mr Tudge, who has just left, talks the big talk about housing affordability. He says that the government has a comprehensive plan and a big strategy, and this of course is errant nonsense. The government has a grab bag of measures, and these measures are amongst that grab bag. These bills seek to introduce three measures that were announced in the budget—disallowing the deduction of travel expenses for residential rental property, limiting plant and equipment deductions to outlays actually incurred by investors, and introducing an annual charge on foreign owners of under-utilised residential property. I will deal with each of these three measures in turn.

The government's big idea when it comes to negative gearing reform—the government's big agenda, their bold and aggressive approach to negative gearing—is not to reform it, limit it to new properties or make sure it's fit for purpose but to say you can't claim for tax purposes the travel cost to get to your holiday house or your rental property under negative gearing. That's it; that's all they've got! It is a joke. It will do nothing to make housing more affordable. We don't oppose it; in fact, we think it's serviceable. But, of course, our policy is to completely reform negative gearing and actually add substantial amounts to the budget over the forward estimates and the decade. What we are seeing here is the most minor of tinkering which will do nothing to impact on housing affordability. Often you have a mixture of investment housing and holiday houses, and there's nothing wrong with that. Landlords can visit their investment house and check on it. There's nothing wrong with that, and it shouldn't be tax deductible, but to suggest that this is part of a wideranging housing affordability policy is a sick joke. Those who are struggling to get into the housing market look at the government's agenda and say: 'Seriously? This is what you've got? You're going to abolish the tax deductibility of travel to investment properties and you think that helps me get into the property market?' Young people across the country will look at this and shake their heads, and well they might, because the government's agenda is devoid of anything substantial. If this is the best they've got then people are entitled to be very cynical.

The second measure involves limiting deductions for assets in residential premises, denying deductions for the decline in value of previously used depreciating assets used in gaining or producing assessable income from the use of residential premises for the purposes of residential accommodation. Again, this is minor tinkering. We don't object to it; we support it. We're all for ensuring that tax concessions are targeted. But they need to do much, much better than this. This is not a housing affordability measure. Treasury, in answer to a question on notice, said so. They said it's an integrity measure—an important thing, of course, but it does nothing to reduce the pressure on housing affordability.

The final measure in these cognate bills is the charging of foreign owners of residential property when the property is not occupied or genuinely available on the rental market for at least six months of the year. The government estimates this will generate $16.3 million over the forward estimates. That's it—$16.3 million. Again, we don't oppose this but we have a better plan. We announced in our housing affordability policy that what we would do is coordinate through COAG a nationally consistent vacant property tax. To be clear: we would not be seeking the revenue. The revenue would go to the states. But we think it should be done in a nationally consistent fashion. Some states have gone down this road. Victoria was the first to introduce a vacant property tax—and congratulations to Tim Pallas, who's a very good reforming Treasurer of Victoria, because we do think it's appropriate that there be a vacant property tax. If a property is held, for whatever reason, and is not being rented out or lived in, it's doing nothing for the social fabric or to help people into the housing market, so there should be a price signal, a disincentive to do that. But it shouldn't just be about foreign owners; this should apply regardless of ownership. There are varying reports as to the number of vacant properties, but it's a surprising number. Many people would be surprised at how many properties are held vacant. It's not a particularly economically rational thing to do but some people do it, so sending a price signal is important. But why is it limited to foreign owners? In other jurisdictions it's not limited to foreign owners. Other places have done this and haven't limited it to foreign owners.

It would make more sense to do this reform properly and work with the states cooperatively to coordinate a consistent rate. We should encourage states to take up a vacant property tax and have a consistent rate so that we don't have the regulatory disharmony of different rates but have one consistent rate across the country, with the revenue going to the states. Again, Treasury admitted in an answer to a question on notice that the states and territories weren't consulted in relation to this measure. It's also notable that the Treasury confirmed, in answer to a question on notice, that there wasn't a direct assumption about how many foreign owners of residential property would decide to make their properties available for rent as a result. No modelling—a theme emerges in the government's approach. So, again, this is really pretty ordinary tinkering on the part of the government.

As I mentioned, we will not be opposing these bills. But this is Clayton's reform. This is the reform that you have when you have to pretend to be reforming. You can just imagine the Prime Minister talking to the Treasurer and saying, 'We've got to have an announceable; we've got to have something we can announce.' They might have said, 'It doesn't have to be real, it doesn't actually have to have any impact, but we've got to have some measures that we can talk about in the budget, and then we can talk about our housing affordability plan.'

We haven't heard the Treasurer say much about these since the budget, and there's a good reason for that. These are just so minor and so tangential to the reform task that's necessary across the country that you would be surprised if he spent much time talking about them. I'll talk about our negative gearing reforms at any opportunity, as my colleagues know. My colleagues will talk about our negative gearing reforms at any opportunity, because they're all proud of them, as the Labor Party should be, because we're leading the debate; we're actually taking on the difficult issues. We know that not everybody agrees with us. Whenever you engage with sensible but big tax reform you're going to have people who are against it, who run a scare campaign or who don't like it in the context of their personal circumstances. But we're being honest with the Australian people about our agenda. We want to win the next election with a mandate to do big and important things—not the sort of tinkering we see from this government, which has run out of puff and run out of a reform agenda.

So, I move:

That all the words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill and related bill a second reading, the House notes that any housing affordability package that does not include reforms to negative gearing and capital gains tax is a sham".

And that's what it is. We have from this government a housing affordability package that is a sham. The Treasurer has a big lever at his disposable. That lever is negative gearing reform and capital gains tax reform. Does he pull on the lever? No, he doesn't. He casts around looking for something small that he can then use to pretend he has an agenda when it comes to housing affordability, and that's what we're seeing in this legislation today. Well, we'll get on with the job. We'll pull the big levers available to us to improve housing affordability for young people in particular—that is, reforming the most generous property investment tax concessions in the world that we have in Australia, putting a more level playing field in place for first home buyers, getting rid of the situation whereby we provide more support for people buying their fifth, sixth or seventh home than people receive to get their first home and making our budget fairer, making our tax system fairer and improving housing affordability—not this sort of pathetic tinkering that we're seeing from the government.

Andrew Hastie (Canning, Liberal Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Brendan O'Connor (Gorton, Australian Labor Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

I second the amendment.

Andrew Hastie (Canning, Liberal Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this, the honourable member for McMahon has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. If it suits the House, I will state the question in the form that the amendment be agreed to. The question now is that the amendment be agreed to. I call the honourable member for Fairfax.

Ted O'Brien (Fairfax, Liberal Party) Share this | Link to this | Hansard source

I'm surprised that the member for McMahon didn't take his tie and shirt off and start beating his chest during his contribution on the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 and related legislation. Such bravery: the big silverback from the Labor Party drags his knuckles across to the dispatch box and tries to claim—and this was the entire theme of his contribution, and he said it I think three times—'This all you got?' Says the big, brave silverback, 'This all you got?' The problem is that what the silverback is suggesting would actually give an entire backhander—not to the government, but to the Australian economy. It would completely smash longstanding, proven tax principles while, by the way—in true Labor form—introducing new taxes. It would totally crash property prices and completely destabilise rental markets. So I'm glad the silverback kept his tie and shirt on. And for the sake of the Australian economy, thank God he is not the Treasurer of this country.

I rise today to support this bill. We're talking about homeownership and property investment. For the past 20 years it has been difficult to imagine a topic that is more consistently talked about around the dinner tables across Australia. The footy and the cricket all have off-seasons, but not this topic. Obsession with residential real estate rolls on and on, following every twist and turn and every up and down of the market. It's a roller-coaster. It seems that the almost irresistible lure of property, whether for occupation or speculation, is a shared characteristic found deep within the DNA of most Australians.

However, times are changing. Today, the great Australian dream of owning your own property, and in particular owning your own home, is slipping beyond the grasp of many Australians and is becoming a distant dream. The recent Grattan Institute analysis of the 2016 census data shows a continual decline in homeownership in all but the 65-plus age group. There has been a steady decline over the past 30 years, coupled with an unprecedented increase in housing prices. This has resulted in an extraordinarily high mortgage-to-income ratio of 25 per cent for 25- to 34-year-olds.

Those who have traditionally transitioned to homeownership by their 30s and 40s are staying longer in the rental market, placing increased pressure on the reliable supply of affordable rental properties, especially around locations where employment and career prospects are best. While it has long been the norm in Europe, and to a lesser degree in the United States, for there to be a far higher proportion of long-term and even lifelong tenants than owner-occupiers, this is a relatively new challenge for Australia, one that flies in the face of our traditional aspirations and, perversely, is at odds with the sense of boundless space that has come to define us as the only people on earth with an entire continent to ourselves.

While these observations are demonstrably true, it must be said that the Australian real estate market, both for sales and rentals, is inherently patchy. In Australia, not all markets are equal, and not all locations experience the same phenomena at the same time. You could, in fact, liken the Australian residential property market to a rolling earthquake, with powerful epicentres in Sydney and in Melbourne and shockwaves radiating outwards, striking satellite and secondary markets later—sometimes much later, if at all. There is one key observation here, which is that the challenge of housing affordability is most critically acute in Sydney and Melbourne, followed at quite some distance by Canberra and still further by Brisbane. This is such a crucial point, as it highlights the danger of taking a heavy-handed, silverback-like, one-size-fits-all sledgehammer approach when addressing this problem, because it's a problem that runs the full gamut of market variability, all the way from a full-blown supply-driven affordability crisis in middle to inner Sydney to almost the reverse situation elsewhere around the nation.

That is why this government has sought to introduce a suite of measures through a targeted and comprehensive plan to reduce pressure on housing affordability, as opposed to dangerous market manipulations involving the removal of negative gearing and capital gains provisions, as is currently being advanced by an economically hapless opposition and hapless shadow Treasurer. The Turnbull government prefers to take a more sophisticated and sensitively nuanced approach to addressing housing affordability and supply in both the selling and rental markets, especially in those markets that need it most. The bills before the chamber today further reinforce a package of measures proposed by the government, reforms squarely aimed at improving housing affordability and rental availability by implementing key provisions of the 2017 budget.

There are three key reforms in this bill. The first two seek to strengthen the integrity of the tax system, while the third goes to boosting the supply of rental properties in key markets. The housing tax integrity bill makes changes to the Income Tax Assessment Act to tighten existing laws and remove tax deductions relating to travel expenses for individual investors when visiting their residential investment properties. Frankly, I think we all know that some residential property investors have been rorting the system, some for many years, by claiming expensive annual holidays as tax deductions on the pretext of inspecting or maintaining their conveniently located investment property.

Well, the gig is up. This bill makes a very welcome amendment, removing this deduction for individual investors without affecting genuine claims for third-party property management services. Aside from the expectation that this reform will reclaim an estimated $540 million over the forward estimates, small business is also set to gain, with likely increased demand for local property services—everything from professional property managers to handyman service providers. This means jobs. We in the coalition just can't help ourselves: by instinctively helping small business, we help those businesses to grow and create more jobs, even when the direct aim of a reform, such as this one, is in fact something else.

The second proposed amendment to the Income Tax Assessment Act closes another loophole by limiting depreciation deductions on plant and equipment assets, such as dishwashers and air conditioners, to only the original purchaser of that asset. Under the current system, depreciation may be claimed by consecutive property owners, in many cases to an amount well in excess of the value of the asset. In provisions allowing some relaxation for new residential property investments purchased within six months of completion, and providing a grandfathering mechanism for existing investments, the benefits of extensive community and stakeholder consultation on this and related measures is plain to see. These changes make perfectly good sense. They will remove another obvious abuse of the tax system and better target deductions for residential investment properties.

Complementing these reforms, which improve taxation integrity and assist housing affordability, is a crucial amendment to the Foreign Acquisitions and Takeovers Act—a reform to help unlock the supply of rental accommodation right where it is needed most and reduce pressure on housing affordability. First, some context. The 2016 census revealed that 11.2 per cent of homes were unoccupied on census night. That is over one million empty homes. Granted, many of these would have been unoccupied holiday homes, homes under renovation or those belonging to people on holidays; however, when seen in the context of a 14.3 per cent rise in the national occupancy rate over the decade—conceding market variations and vacancy rates across state capitals—this strongly suggests many investment properties are being deliberately left unoccupied, particularly in supply-depleted state capitals.

The Turnbull government is responding to genuine community concerns on this issue. We are acting to improve the supply of rental accommodation in key capital city markets, and this measure is intended to do precisely that. By amending the Foreign Acquisitions and Takeovers Act to establish a significant annual vacancy charge on foreign owners of residential properties who leave them unoccupied for six months in any 12-month period, the government is providing a strong financial incentive to have the properties tenanted. This is good news on two fronts: firstly, for those looking to rent, and secondly, and perhaps less immediately, for those looking to buy. By releasing supply back into the market, either for rent or for sale, housing affordability is expected to be improved, particularly in strained inner-city markets, which have traditionally seen higher levels of foreign investor activity in recent years.

Unlike Labor's own ill-conceived housing affordability plan, designed to disrupt the longstanding principles of taxation, to smash property prices and to completely destabilise the rental markets across Australia, the coalition prefers to utilise a comprehensive suite of subtle targeted reforms that will assist pressured markets to self-correct and return to balance. However, it must be said that even the Labor Party can find little fault with this reform. That is why, despite their poor attempts at mockery, they stand with the government in wishing to support this bill. There is also a fine balance to consider here, where the government must ensure adequate, affordable housing for Australians while at the same time continuing to encourage sustainable, job-creating foreign investment. That's what we are doing with this bill. By creating the right incentives to strengthen the integrity of Australia's tax system, while helping to unlock supply, this government is delivering on its commitment to improve housing affordability for all Australians. For that reason I'm delighted to commend this bill to the House.

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Link to this | Hansard source

I'm speaking in support of these two bills, which seek to implement three of the government's 2017-18 budget measures, ostensibly related to housing affordability. Schedule 1 of the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 amends the Income Tax Assessment Act to ensure that travel expenditure incurred in gaining or producing assessable income from residential premises is not deductible; and not recognised in the cost base of the property for capital gains tax purposes. This particular amendment seeks to address concerns that some taxpayers have been claiming travel deductions without correctly apportioning costs or have been claiming travel costs that were for private purposes. The amendments are not intended to affect deductions for institutional investors in residential premises, nor are they intended to affect deductions for travel expenditure incurred in carrying on a business. That's a very important distinction to make.

It's clearing up an area of our law where tax concessions have been too generous, but this bill doesn't go far enough in respect of those generous tax concessions that exist in housing, particularly when it comes to investment properties. I'm speaking, of course, of negative gearing and the capital gains tax discount, which this government has allowed to stay in place and refuses to tackle, fuelling an explosion in house prices, particularly in Sydney and Melbourne. Basically, although we are supporting this particular measure, the bill simply doesn't go far enough. If the government were fair dinkum about tackling housing affordability and taking the upward pressure off house prices, particularly in markets like Sydney and Melbourne, they would look at this issue of negative gearing. If two people rock up to an auction on the weekend to compete for a house, and one of them is an investor, who may be going to negatively gear their seventh or eighth investment property, they get more support from the government than the other, who is going along to seek to buy their first home and get a foot in the door of the market. That is simply unfair and something that Labor stands against.

Schedule 2 of the bill amends the Income Tax Assessment Act to deny income tax deductions for the decline in the value of previously used depreciating assets used in gaining or producing assessable income from the use of residential premises for the purposes of residential accommodation. These bills will implement an annual vacancy fee on foreign owners of residential real estate where residential property is not occupied or genuinely available on the rental market for at least six months in a 12-month period. The Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017 imposes the vacancy fee and establishes the amount payable. Broadly, the fee which will be payable when the dwelling is left vacant is the fee that was payable at the time of the foreign investment application. Labor support these measures, and we won't oppose them.

It's clear, however, that these aren't about housing affordability. These are, plain and simple, primarily integrity measures. When it comes to housing affordability the government is unwilling to do what's necessary to tackle these issues of negative gearing and capital gains tax. That represents just how out of touch the government is. In the electorate that I represent not a week goes by where I don't get a complaint or a concern from a constituent, predominantly a parent or grandparent, worried and concerned about the fact that their kids will never be able to afford to buy a home in the community that they grew up in around their family networks and friends. In modern-day Australia, that's a great shame. It represents a failing of government. It's incumbent upon governments to ensure that housing is affordable for Australians as really housing is a human right.

I've discussed in this place in the past the reality of attempting to buy a home in the community that I live in. In the last three years—2014 to 2017—the price of a home in the suburb of Malabar has grown by a whopping 46 per cent to an average of $2 million, adding $635,000 to the value. That equates to an increase of $580 every single day. That is how much the value of properties in Malabar has gone up every single day, on average. In Coogee the case is no different: on average, prices there have grown by $592 every day to just under $2.4 million. These are the eye-watering facts about the area that I represent. As you can imagine, it's causing considerable concern among people struggling to enter the housing market and struggling with the soaring costs of rents associated with that generally high cost of living.

The seriousness of this issue requires a serious approach. Unfortunately, the government are not giving that serious consideration. Their total indifference to the fact that they're completely out of touch on this issue has left Australians facing unprecedented financial pressures when it comes to housing affordability. This week we've seen the government fail to alleviate another area of cost pressure for households, with their so-called plan for energy. They've come up blank when it comes to dealing with this issue. All we're going to see is household electricity prices continuing to increase into the future.

Investors have been given a leg up for too long by this government when it comes to the housing market. It's absolutely unacceptable that a person going along to an auction this weekend to purchase their seventh or eighth investment property will get a tax deduction from this government to negatively gear over the years to come and gets more support from the government than a young couple that may be just married and are seeking to buy their first home. Australia has a progressive taxation system, and improving the fairness of that system should be a key priority. Currently the way that system works is unfair, because 50 per cent of the benefit of negative gearing goes to the top 10 per cent of income earners. The people that are benefiting from this outdated system, the most generous tax concessions in the world for property investors, are the wealthiest Australians. The top 10 per cent are absolutely getting the benefit from this. Fifty per cent of those benefits go to the top 10 per cent.

When it comes to capital gains tax concessions and discounts, the problem gets even worse, because in terms of the capital gains tax discount—the 50 per cent discount on the capital gain that you make from selling an investment property—70 per cent of that benefit goes to the top 10 per cent of income earners. That says everything about the inequity that exists in the housing market at the moment which is fuelling outrageous increases in prices. When it comes to superannuation we have a similar scenario, where 30 per cent of the benefit of superannuation tax concessions goes to the top 10 per cent of income earners.

If you're fair dinkum about tackling some of those issues and bringing a bit of equity into the system, you need to look at that system of negative gearing and capital gains tax discounts and who's benefiting from them. Ultimately, you're shrinking the pie of homeownership for the majority of Australians by providing a tax concession that encourages the few to invest in more. First home buyers now only make up around 13 per cent of all home purchasers—well below the historic average of 20 per cent. This is quite an alarming trend. With housing making up 60 per cent of all assets owned by Australian households, it has become a source of great frustration and misery for those who are missing out in our society. For many, home ownership has transformed from a dream into a nightmare.

That's something that Labor have been listening to the community about and are serious about changing. We want to end some of the imbalance that exists in our taxation system at the moment when it comes to overly generous, massive concessions that benefit the most wealthy in our country at the expense of the majority. Labor will build on our existing proposals with new policies to improve housing affordability, to increase supply, to boost jobs and to reduce economic risks.

We've announced a housing affordability policy. It's been there for some years. We announced it in the lead-up to the last election, and we haven't been a small target on this issue. We have been willing to listen to the community and willing to do the necessary legwork when it comes to the economic modelling and working out how changing the system would affect the market. We've announced the policy, and we've had the policy independently modelled and independently costed, importantly, by the Parliamentary Budget Office. That has indicated that the policy raises additional revenue—not only over the forward estimates but over the medium term—that we can put back into the budget to ensure we properly invest in schools and hospitals. It will also create 25,000 new jobs per year in Australia and over 55,000 new homes over three years to boost those employment numbers.

The elements of the policy are quite simple. Firstly, we'll reform negative gearing and ensure that it's restricted to new housing stock. Anyone that's currently in the system will be grandfathered. So, it's an orderly transition. There's no dramatic change for people who are currently in the system. If you're negatively gearing a property, you'll be able to continue to do so. But, from a particular date in the future, if Labor is elected, negative gearing will be restricted to those people seeking to buy off-the-plan developments. That will boost the housing supply and create jobs in this sector. We will reduce the capital gains tax discount on the sale of investment properties by half—reducing the generosity of a policy that, when it was introduced by Peter Costello as the former Treasurer of this country during the Howard government years, was unfunded. That says everything about the profligacy of that particular government and the spend-at-all-costs approach that they had—which we are all paying for now. It was that government that introduced policies like the 50 per cent discount on capital gains tax, the changes to superannuation and uncapping payments for people. Those policies were unfunded. In other words, there was no source of funding for them in the budget. We are all paying for that now. Not only were they bad policies; they were irresponsible fiscal policies and Australians are paying for them now.

But we will fix that. We will: reduce the capital gains tax discount on the sale of investment properties by half; facilitate a COAG process to introduce a uniform vacant property tax across all major cities; limit direct borrowing by self-managed superannuation funds that invest in property; increase foreign investors fees and penalties; establish a bond aggregator to increase investment in housing affordability; boost homelessness support for vulnerable Australians; get better results from the national rental affordability agreement; re-establish, importantly, the Housing Support Council; and, importantly, make sure that there's a seat at the cabinet table for a minister for housing who can advocate on behalf of Australians about the importance of this issue.

That is a set of policies that demonstrates a party is fair dinkum about the issue of housing affordability in this country. That's a serious housing affordability policy. That's what a serious housing affordability policy looks like. It is fully costed, it is independently verified that it will work, it will create 25,000 jobs in the economy and it will boost housing supply by 55,000 dwellings over the course of three years. It is independently costed and independently modelled, and it is something that will work. That's what Australia needs if we're going to tackle this housing affordability crisis. Only Labor are fair dinkum about making sure that we tackle the issues of negative gearing and capital gains tax and that we produce a bit of affordability in the housing market in Australia to ensure that particularly those young families who are seeking to get into the market have the opportunity to get a dwelling and a roof over their head and to live, importantly, close to their families and in the communities which they grew up in.

Luke Howarth (Petrie, Liberal Party) Share this | Link to this | Hansard source

It gives me great pleasure to speak on the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017. The legislation before the House takes practical steps to ensure that we have a strong rental market and that people are not taking advantage of our tax system.

The Treasurer outlined an array of measures in his budget speech earlier this year to ensure integrity and stability in the real estate market. Yesterday, I spoke on key legislation that will help first home buyers supercharge their savings as they plan to purchase their first home. I also spoke about incentives for older Australians to downsize, opening up the market for growing families. Today, I rise to speak on legislation that is aimed at improving our rental property market and the integrity of our tax system. I'll outline, firstly, measures that impose the framework of our tax system with regard to deductions for rental properties and assets and, secondly, measures that ensure the rental market increases the number of homes available to Australians.

The bill focuses on individuals who claim travel expenses when visiting their rental properties. I was speaking to one constituent who was telling me that he owned and managed his properties in Bundaberg, approximately 340 kilometres from his home. He was very concerned about the discontinuation of his ability to claim a deduction for travelling to and from his rental properties; he felt that it would not be financially viable to continue managing his properties. These proposed amendments don't prevent investors from engaging third parties to provide property management services. These services will still remain deductible. Yes, this bill does limit people travelling to their property and claiming deductions for travel. That's no longer going to be available. So I would say to people, if you're going to drive 340 kilometres return to visit your house to do a bit of maintenance on it, it's probably more viable to ensure that a local handyman, plumber or gardener—for whatever it is that you need doing—in that area services the property for you. That would make a lot more sense.

Unfortunately, we've seen some people take advantage in relation to this claim when they've actually been on holidays and so forth. They have been treating the system unfairly. For example, a person living in New South Wales who owns a home on Queensland's sunny Gold Coast may decide to take a trip up to their unit once or twice a year to inspect it, replace a flyscreen or put some mulch on the gardens. However, the primary purpose of their trip was a holiday; it was to enjoy the beaches and maybe do just a little bit of handyman work. That's fine. They can still have an investment property there, but their airfares to fly or to drive there and return won't be tax deductible. So from here on in it might be worth it getting a real estate agent to manage that property and to use the services of local tradespeople in that area. I noted previously—and I want to emphasise this to property investors—that maintenance is still fully deductible, but I encourage all people to employ a local tradie and help boost the economy and then claim those expenses back on their tax return. You can still maintain your rental properties. However, you can no longer claim your airfares or any associated travel costs for your trip.

The bill also tackles another integrity measure regarding generous valuations for plant and equipment purchased. We are cracking down on property owners claiming depreciation of assets that were part of their original contract when they purchased the property. So if you've bought a new property and the dishwasher was included or some type of vehicle or machinery was included, you've really purchased that as part of the property price. You've really got that as part of the value. You won't get to also depreciate that asset when it's being purchased as part of that property.

I'd like to expand on some key aspects of the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017. The government is very aware of the importance of foreign investment. However, we want to discourage foreign investors from buying real estate in Australia and leaving it empty for months or even years on end. If a person from overseas, perhaps living in Europe, bought a house in Australia, firstly they would need to seek approval through the Foreign Investment Review Board, commonly called FIRB. Key to this approval is that foreign investors are allowed to purchase only new properties in Australia—not renovated homes but brand-new houses, townhouses or units.

This legislation we are debating today ensures that owners of non-residential foreign investment homes prove that their property in Australia is being rented out for at least six months a year. Otherwise, they will be charged a vacancy fee. The fee will vary depending on the property. For example, a $600,000 property would be charged $5,500, whereas a property valued at $2 million would be charged $22,300 if the property is left vacant. The purpose of this is to ensure that these properties are not left vacant. It's to free up accommodation for Australians to rent, to make sure that there is plenty of supply for Australians. And this is very important. New properties have to be bought so that the supply increases, but we also want to make sure that those properties are rented out. I want to stress that these amendments do not apply to Australians. So, for Aussies who own a home, wherever in the country it is—in Townsville or Cairns, or in Western Australia—and who use that home only during school holidays, for a few months a year, that is okay. That is up to them. They can continue to do that if it's a holiday home and they can afford to do so. So it doesn't affect Australians.

We are serious about ensuring that strict regulatory practices are in place to protect Australia's real estate. There are multiple cases where investors have had to sell their property because they didn't have the correct approvals through FIRB. The Treasurer has ordered the forced sale of 61 houses since the coalition was elected, totalling over $107 million. Labor cannot be trusted with foreign investment. The member for McMahon, who spoke earlier, when he was the Assistant Treasurer made changes to the foreign investment legislation to make it easier for foreigners to buy property without any scrutiny at all. He dumped the screening arrangements for temporary residents to notify the Foreign Investment Review Board of residential purchases. When the opposition was in government, not one divestment order for a property was issued for illegally acquiring a property—not one. There have been 61 since we came in, totalling over $107 million. And the shadow foreign minister wants to change the Foreign Investment Review Board requirements for the purchase of agricultural land—wants to put it through the roof. The coalition brought it down to $15 million, and the Labor Party want to put it back up.

In my electorate, people do not support that. They want to make sure there is a register that is accountable so that the government knows how much of our land is foreign owned. I remember that when the Kidman cattle station came up for sale people wanted to make sure it was majority Australian owned. They'd been very, very clear about that. So, taking that $15 million combined level—an aggregate level—and increasing it through the roof, as the shadow minister for foreign affairs, Senator Wong, wants to do, is not supported by my electorate and I suspect is not supported by the people in the electorates of many of those on the other side of the House.

The coalition has been at the forefront of ensuring that foreign investment is regulated. As I said, we want to ensure that we know how much foreign investment we have in this country. It was a Liberal government that established the FIRB back in 1976. This non-statutory body was established to monitor foreign investment proposals and compliance within its policies. The coalition government have continually moved to improve our foreign investment framework. The government have also introduced tough new laws to ensure capital gains tax is paid by our foreign investors and those who purchase property whilst living in Australia on a visa. We want to ensure that taxes owed to the Australian government are paid here and not taken overseas, and this is a very important area that the coalition are also cracking down on. We have continually taken measures to ensure we know who is buying our land and to restrict the types of properties foreign investors are able to buy. This legislation is just another example of our government always looking to protect Australia's interests.

Our government is committed to affordable housing. Ensuring our community has affordable housing and making sure that supply increases, and that the current supply is available for rent, provides options and ensures that there's much more housing available for those who need it most. Our goal is to increase the number of rental properties available for Australians to live in. I believe Labor's policy to try to fix the property market through abolishing negative gearing will only push house prices down and rental prices up. As an example, in my electorate, someone like Lisa and Todd might purchase a home for $450,000 up in Burpengary East in my electorate, or perhaps in Griffin in my electorate. They put a $35,000 deposit down. They don't have 20 per cent, so they'll probably be up for mortgage insurance as well. They currently would owe $415,000. Labor want to abolish negative gearing on existing homes. Lisa and Todd have got a new home, an existing home, and they will owe 415 grand on it, having purchased it for $450,000. If the value of that home drops by just five per cent when Lisa and Todd go to sell, it will be worth $425,000. That means, because of Labor's policy of abolishing negative gearing, they will have lost $25,000 of their own deposit. I see a lot of young couples in my electorate in this situation, with less than 20 per cent deposit. It would be great if they had a bigger deposit, but Labor is voting against our super saver scheme that will give those people and everyone in their electorate a $6,000 tax break. They're voting against young people who want to be able to do that, and I fear their policy could mean that people who buy a house and have to sell in a reasonable time frame will see the value of their house fall and, when they pay out their loan, there goes their deposit.

The other thing, which we didn't campaign on in the last election—the coalition was very positive in the last election—concerns the people in my electorate, in Deception Bay, Kippa-Ring and Clontarf, who rent. I've continually said that there are a lot of low-income people who won't buy their own home. They can't afford to buy their own home. There is always a percentage of Australians on lower wages and there needs to be lots of rental stock available. If people can't negatively gear then I like to say they'll have to positively gear. They'll have to make sure that the rent is covering the loan on that property. Right now interest rates are low—God help these people if the interest rate goes up. If interest rates go up, rents will go up significantly and you'll see a real housing crisis for the people in this country who can least afford it.

Labor don't like this bill and the bill we introduced yesterday because they go a long way to addressing some of the excesses in the rental property market. People going on holidays—travelling—because of rental properties will be gone, and we will be making sure that people can't claim deductions for things when they were bought as part of a house. Sure, if the dishwasher or the air conditioner breaks down and they need to buy a new one, great, then they should be able to claim that as a deduction—but not when it has been purchased as part of the house and it's already part of the deal. The coalition has been moving on that. We also see Labor wanting, as I say, to not have the records that the coalition have kept in relation to foreign investment, which will see more foreign investment. They talk about wanting to make sure Australians have a big deal—this is important.

It's good that the opposition is actually supporting this bill, as the shadow Treasurer has said. These bills are important steps in making sure that housing is more affordable and that there are more rental properties available—and they're good for our housing market and for my electorate in general.

Milton Dick (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

I rise to enter the debate today, and I want to thank the member for Petrie for confirming exactly what Labor's policy will deliver, when he said, 'If Labor's policy was adopted, prices would go down.' We know that at the moment that, for young people to get into the housing market, it is not the Australian dream; it is the Australian nightmare. We know from listening to middle Australia and listening to people who want to own their own home that the best way and the fairest way is to make sure there is a government in this nation that recognises and gives a tax break to people who want to enter the housing market, not one that rewards those who are looking at buying their eighth, ninth or 10th property. As we heard from the member for Kingsford Smith, Australia has the most generous negative gearing in the world when it comes to taxation.

The government continues to dance around the issue of housing affordability whilst a generation of Australians face the prospect of simply being locked out of the housing market. Before the House tonight, we have the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment (Vacancy Fees) Bill 2017, both of which will do nothing to address the housing affordability that this government likes to claim it is doing something about—but which, by the way, are opening the door for young Australians to reduce their own superannuation savings. That was a debate we had last night in this chamber, so it's a bit like groundhog day when it comes to talking about housing affordability. But it is a really important issue for the constituents I represent in this place.

I know, from representing one of the fastest growing corridors in Australia, the battle—and it is a battle—that young people face to get into the housing market. I mentioned last night, here in this place, the submission from Industry Super Australia, in which they say that the First Home Super Saver Scheme—which we just heard about from the member for Petrie—'potentially exacerbates the housing affordability problem' rather than does anything to address it, and 'also undermines the important goal of the superannuation system as a provider of adequate retirement income'. I said in my address to the House last night when dealing with this scheme that, since superannuation came into force—since the legislation was first enacted under the leadership of the Keating government, under the leadership of John Dawkins—the coalition have opposed it, and now they are undermining it.

The government continues to tiptoe around the issue and put forward bills such as these. Make no mistake; these measures have nothing to do with housing affordability. Any housing affordability package that does not deal with negative gearing and the capital gains tax discount is a sham. That's why I am a strong supporter of the member for McMahon's amendment, which we will be voting on. I will be strongly supporting it, and I will be asking members of the government to think about and consider the measures before us tonight, but, more importantly, the amendment, which says:

"whilst not declining to give the bill and related bill a second reading, the House notes that any housing affordability package that does not include reforms to negative gearing and capital gains tax is a sham".

I say that very deliberately because, within the community I represent, I see the struggle that young people have with housing affordability. I note that, when my friend the member for Lindsay is out in her community, when any single Labor member is out in their community, and they talk to residents at shopping malls, markets, cafes, community groups and town halls—just as the Leader of the Opposition, Bill Shorten, does week in, week out, sitting down, rolling his sleeves up and listening to middle Australia—the issue of housing affordability comes through crystal clear. We've heard the message on this side of the House but, sadly, the government, with its tin ear and its out-of-touch Prime Minister, is sitting on its hands. We just heard about Tom and Lisa, constituents of the member for Petrie. I want to imagine that it's four years from now and, as a 22-year-old who maybe recently graduated with a degree in engineering, they've worked hard, their parents have supported them, and they can't wait to take the skills and knowledge that they learned, perhaps through university, a trade or TAFE, and now apply it to the real world. Maybe the last four years of study has been tough. Since moving out of home they've had to fork out for the expensive rents that come with living near enough to perhaps the closest capital city university or regional centre. They've been working more than 20 hours casually to support themselves through study, but it's all made tougher, we know, since the government has cut penalty rates. Sundays used to bring in that bit of extra cash to help with the groceries and increasing rents, or maybe the electricity costs or paying off your car or just getting out and about with your friends.

Nonetheless, you have graduated from university and you're ready to take on the world. However, you quickly learn that the job market is very tough and finding employment in your field isn't as easy as you thought. The youth unemployment rate for people aged 15-24 is still double that of the national average. You're desperately keen to get your foot in the door, so you take an admin role, perhaps in a leading engineering firm, until something opens up for you. The starting pay is just $48,000 a year, but it's better than nothing. You soon learn that, because the government has cut the threshold for HELP repayments, your take-home pay is now even less. On top of that, you're hoping to land an entry-level engineering job. You also have hopes of saving up for the elusive home deposit.

The government are proud to say that they're happy to do nothing about negative gearing. House prices have continued to rise, and the average home on the outskirts of a capital city has an asking price, if you're lucky, of $500,000. This issue has been bubbling around since the government, now in its fifth year, came to power. The previous Treasurer, Mr Hockey, said, 'Well, you should just go out and get a good job.' Moving forward, when the Prime Minister was asked on radio about how to get a deposit and own your home, the Prime Minister, straight from Point Piper, said, 'Well, have you thought about getting rich parents?'

We know that in the real world that simply doesn't happen. With tight budgeting and maybe not eating any smashed avos, you're able to save $50 per week. The bank will require a 20 per cent deposit, meaning you have to save $100,000. At the current rate, this will take around 2,000 weeks to save—the next 38 years of your life. It's a sobering situation, but this is the one issue facing thousands and thousands of young people right across the country. I know from talking to mums and dads and grandparents in the suburbs that I represent that they talk about this. They deal with this issue: how do you get the 20 per cent deposit, with prices rising up and up?

I understand it and members on this side of the chamber understand it. But, if you've never heard it or you've never lived in the real world, or perhaps you're not walking down the same shopping centre aisles or going to the same cafes or community meetings that I go to, you don't understand it. You don't understand what it's like being forced to scrape and save every single day just in order to own your own home. In doing so, young people are forced to take on record levels of debt that were unimaginable just two decades ago. For those who have been able to buy a home, mortgage debt among 18 to 39-year-olds doubled between 2002 and 2014, jumping from $169,000 to $336,000. This is not sustainable and cannot continue, which makes the government's one silver bullet—raiding your own super scheme—all the more crazy. They want young people to take on more debt and more risk to get into the housing market, so when you do finish your working life you're less prepared to have a guaranteed income. Their entry scheme, which we've just heard about from members of the government, would see demand for housing increase and push up prices even further.

As we heard from the shadow Treasurer, what we must do is address the issue of negative gearing and the impact that it is having on homeownership rates. The recent report from the Grattan Institute highlighted that negative gearing has many undesirable consequences. It reduces rates of homeownership, it reduces the availability of long-term rentals and it increases the volatility of housing markets, increasing the risks to the Australian financial system. The Grattan Institute summed it up best when it said:

The most obvious thing the Commonwealth Government could do is reduce the capital gains discount and abolish negative gearing. It wouldn't solve the problem but it would help.

Everybody seems to get this and everybody seems to understand it, except the government. I've said it in this place before and I'll say it again: what will it take for this government to realise that it must follow Labor's lead and act on negative gearing and housing affordability? We on this side of the House understand it. We represent middle and working Australians proudly. They are crying out for leadership. They are crying out for someone to stand up for them. They simply don't believe the spin and the nonsense that comes from the government about raiding superannuation. It is not the answer; it will only make it worse. That's what they want to do—tinker at the edges with bills like the ones we're debating today and raid the superannuation accounts of young Australians to increase demand and push up property prices.

We know the government doesn't believe in the integrity of the system of compulsory super. The government will look for any opportunity to weaken—not strengthen, but weaken—our system of superannuation. This is a government attempting to set a precedent that Australia's $2.3 trillion in retirement savings can be accessed for something other than what it was intended for—retirement income. It goes against the core objective of superannuation. We know from speaker after speaker from the government that they're not interested. They're not committed to dealing with the issue of housing affordability. When I speak to local families and mums and dads and grandparents, I know that they are worried—people in suburbs like Springfield Lakes, Springfield, Collingwood and Bellbird Park, which are seeing a huge amount of demand coming online. But the prices are being pushed up and up, and the government refuses to do anything when it comes to the supply side issue.

I could go on about some of the other suburbs I represent, but I am no different from any other member in this House. Right across Australia, people are hearing the same message about housing affordability. Right across Australia, people want to see action so that their kids and grandkids have the same opportunity that everyone else had—the great Australian dream. The government simply aren't speaking with everyday Australians. They certainly aren't talking with potential first home buyers.

Earlier today I was speaking in the Federation Chamber about the government's other pet issue—its other set obsession—which is giving a $65 billion tax cut, of which we know billions of dollars will go offshore and also to large multinational companies. If the government is serious about wanting our support for housing affordability and if it is serious about tackling these issues, it must, and it has to, look at the issue of negative gearing and capital gains tax. It's that simple.

We have to have that conversation in the community, because the community is demanding it. Time and time again we've been calling on the government to listen to what the community is saying. Time and time again we have been calling on the government to listen to the superannuation industry, which is not supportive of what the government is doing to undermine our retirement income planning for this nation. If you're lucky enough to buy your seventh, eighth or ninth property, good luck to you—you've done well and you've been a success. All we're simply saying on this side of the chamber is that everyone deserves the opportunity to enter the market as a homeowner. But, more importantly, every young person in this country deserves the opportunity of owning their own home.

Michael Sukkar (Deakin, Liberal Party, Assistant Minister to the Treasurer) Share this | Link to this | Hansard source

Firstly, I want to thank all members who contributed to the debate. The 2017-18 budget demonstrates the government's commitment to reducing pressure on housing affordability so that homeownership is more achievable for Australians. This legislation delivers on this commitment by improving the integrity of Australia's tax system and boosting the availability of rental accommodation in the market.

Schedule 1 of the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 amends the Income Tax Assessment Act 1997 to disallow deductions for travel costs incurred in producing or gaining assessable income from residential premises as residential accommodation. The changes mean travel costs for individual investors, such as to inspect and maintain properties, will no longer be deductible. This will stop residential property investors from using the tax system to pay for their holidays by claiming costs as a rental expense. However, these changes don't prevent investors from engaging third parties, such as real estate agents, to provide property management services. These expenses will continue to be deductible. The change to disallow travel expense deductions has an estimated gain to revenue of $540 million over the forward estimates.

Schedule 2 of this bill amends the Income Tax Assessment Act 1997 to limit, from 1 July 2017, plant and equipment deductions for investors in residential investment properties to assets not previously used. There has been an abuse of the tax system when it comes to property investors claiming excessive deductions for plant and equipment items. These changes will improve the integrity of the tax system by better targeting these deductions. Investors who purchase new plant and equipment for their residential investment property after 9 May 2017 can continue to claim a deduction over the effective life of the asset. However, subsequent owners will not be able to claim deductions for those plant and equipment items. These changes will not affect capital works depreciation deductions relating to residential property investments. The change to limit depreciation deductions has an estimated gain to revenue of $260 million over the forward estimates. These changes, together with the change to deny travel deductions, improve the integrity of the tax system and reduce the opportunities for excessive deduction claims.

Schedule 3 of this bill, along with the imposition bill, implements an annual vacancy charge on foreign owners of residential real estate where property is not occupied or genuinely available on the rental market for at least six months in any 12-month period. The vacancy charge builds on the government's existing foreign investment regime, which seeks to increase the number of houses available for Australians to live in. The charge provides a financial incentive for the foreign owner to make their property available on the rental market. The charge payable will be equivalent to the residential application fee that was paid by the foreign person at the time the application to purchase the property was made to the Foreign Investment Review Board. The vacancy charge applies to foreign persons who make a foreign investment application for residential property from 7.30 pm on 9 May 2017. For eligible foreign owners of residential real estate the vacancy charge will be levied on an annual basis. The annual vacancy charge is expected to result in greater use of foreign owned properties. Reporting and notification requirements are also expected to provide greater visibility of vacancy rates for foreign owned properties. The Australian Taxation Office will administer the vacancy charge. The changes contained in the legislation have been designed to open up the residential rental market and strengthen the integrity of Australia's tax system. I therefore commend the bills to the House.

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for McMahon has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. Therefore, the immediate question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.