Mark Coulton (Parkes, Deputy-Speaker) Share this | Link to this | Hansard source

The question now is that the amendment be agreed to.

Peter Khalil (Wills, Australian Labor Party) Share this | Link to this | Hansard source

I am pleased to be able to resume my contribution to the debate on the so-called reducing pressure on household affordability measures. I was talking about how I as an MP with a good salary was priced out of my own suburb in my electorate. The asking price for the house we were renting was almost $2 million, and we just couldn't afford that. So you can imagine the difficulty facing millions of Australians: young Australians, first home buyers, working- and middle-class Australians who have worked hard but can't get anywhere near the dream of homeownership.

No party has a particular monopoly on good ideas. We hear that all the time. But let's make no mistake here: this government has the policy lever in its hands to reform negative gearing and the capital gains tax discount, but it is unable to do so—unwilling to do so. They can act and deliver relief to so many millions of Australians who are trying to get into the housing market, but they have actually refused to do so. Among all of the advanced economies, Australia has some of the most generous taxation concessions for housing investments. In recent years this has helped fuel an investor-driven property boom, leaving more and more young people—first home buyers and even young families—unable to purchase a home. The interaction of negative gearing and the capital gains tax discount has also encouraged speculative behaviour, exposing the economy to unnecessary levels of financial risk. I would like to quote from a Grattan Institute report on housing policy:

The combination of capital gains tax rule changes in 1999 and negative gearing has strongly increased the demand for investment properties. Investors compete directly with potential homebuyers, particularly for established houses. This makes it harder for first home buyers to secure a property.

From all the anecdotal stories you hear, that is certainly true. When young couples or young couples with a family—their first kid or even two kids—go to an auction, they're competing with someone who is going for their third, fourth, fifth, sixth, or even seventh investment property, and they are just unable to compete.

On that basis, I unequivocally support the amendments moved by the member for McMahon as they acknowledge that the First Home Super Saver Scheme will do nothing to address housing affordability but will instead work to undermine Australia's world-class superannuation system. Any housing affordability package that does not include reforms to negative gearing and capital gains tax is a sham.

Fairness is at the heart of this debate—at least on our side. I believe Australia tries to be a fair society. We expect our tax system to align with this value. Most Australians have taxes withheld by their employer in a pay-as-you-go scheme. Of course, the more you earn, the more you pay. The progressive nature of the way most Australians pay tax doesn't apply to some other aspects of the tax system. Tax subsidies, like negative gearing, disproportionately favour wealthy people who have large amounts of capital at their disposal. And it has to be understood that a dollar of tax avoided in one case is probably an extra dollar of tax paid by everyone else. It's simply unfair.

I now want to turn to schedule 2 of this bill, which provides for a scheme for profits achieved through downsizing a property to be placed into superannuation to achieve a tax efficiency. As some speakers noted, there is a legitimate debate around this issue. While I do not believe that older Australians should ever be coerced into selling a beloved family home because they fear being financially penalised if they do not, there are many cases in which a large family home is not required later in life, once people's kids have moved out and retirement is upon them. Labor has looked at the interaction between downsizing and the pension and looked at people on low and middle-class incomes who might consider the need to downsize. The government is concentrating on the superannuation side of things, proposing to allow people aged 65 or over to make a non-concessional contribution of up to $300,000 from the process of selling their home. These contributions would be exempt from the age test, the work test and the $1.6 million balance test for non-concessional contributions. This measure would overwhelmingly impact on people at the highest end of the spectrum when it comes to savings, not those who are concerned about the interaction with the age pension. While there is a debate to be had on that score, it is a flawed premise that this will promote the release of housing stock and thus ease pressures on property values.

I note that the member for McMahon put questions on notice to the Treasurer to provide an estimate of how many people may opt to downsize as a result of this proposal. As we've heard, the Treasurer appears to have no idea of how many people would in fact choose to downsize. How on earth can the Treasurer conclusively say that more housing stock will be available in the market without any indicator on this front? It's blind faith at best. It's nothing more than guesswork. This debate is an opportunity to highlight the government's capricious disregard for the budget bottom line, which has grown worse under the weight of this government's mismanagement. Reckless tax subsidies are unsustainable and unaffordable. Indeed, several tax subsidies, including negative gearing, are growing at a rate that is unsustainable. Quite simply, the budget position today and over the medium term cannot afford both these generous subsidies and the necessary investments required to boost growth and jobs.

It is appropriate that every budget line item that is growing rapidly undergoes close scrutiny to ensure that the subsidy is achieving its stated objectives and that the quantum is appropriate when evaluated against competing policies. Two specific deductions—negative gearing and capital gains subsidies—are both significant calls on the budget and are growing at such a rapid rate that they need to be addressed. It is undeniable that negative gearing and the capital gains discount have not achieved their aim to boost housing supply and encourage the building of more new houses. In fiscal year 2016-17 they cost the budget over $10 billion. As an illustrative comparison, that's more than the government spends on higher education or child care. The capital gains discount subsidy is growing so rapidly, with revenue forgone doubling from $4.2 billion in 2013 to $8.6 billion by 2018-19. The repeated claims by the government—the justification for the immense cost to the public purse—that the benefits of such tax subsidies go overwhelmingly to low- and middle-income earners are simply incorrect. The government uses income data after deductions have been applied. More reliable data that uses gross income shows that the benefits go overwhelmingly to higher income earners. We see on this side, and it is there for all to see, that this is where the skewed priorities of this government come into sharp focus.

Julian Hill (Bruce, Australian Labor Party) Share this | Link to this | Hansard source

I'm going to make a big call at the outset of my contribution to this debate on the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 1) Bill 2017. I'm going to say that from my point of view the greatest disappointment in this year's budget, in the Treasurer's pathetic speech, was the sheer lack of understanding shown by the government towards young people looking to buy their first homes. I say that's a big call because there was a lot that was disappointing in this budget. Mainly, though, I think you can say they were bad calls: a tax cut for everyone in this chamber and a tax rise for everyone else in Australia, $65 billion of unfunded company tax cuts, cuts to education—I could go on. But I say that this is disappointing because in the lead-up to the budget the newspapers were full of speculation. Government ministers were on the telly talking up the big housing reform package we were going to see. Did we see a strategy? Do we have a minister for housing? Still—in the fifth year of this government—there is no minister for housing. Did we see anything real? No. Like the Prime Minister—who has now lost, I think, 21 Newspolls in a row—the housing reform package is a fizzer. There is nothing substantial in the budget. There's a mishmash of teeny, tiny, little measures that don't do much harm but don't really do anything.

We've had a few bills through to give effect to this 'nothing much' of a package. Most are actually integrity measures. You might remember in June, for those avid listeners at home, the foreign resident capital gains withholding payments bill, which apparently was part of the housing reform package—innocuous, but it didn't do anything in relation to housing reform. It was honestly described as an integrity measure. When we finish this debate, the next couple of bills to be debated cognately are three measures. Two are actually described, in a moment of honesty by the government, as 'integrity measures'. I won't breach the standing orders by debating those bills now, but I just note the impact, because it is relevant to the second reading amendment. Those two measures are travel deductions and previously used asset deductions. I am entirely unclear on what the impact on housing affordability might be—tighten up the tax system? Sure. There's a vacancy tax. It might pop a few more houses into the supply. Great. But there's negligible impact on housing affordability.

But those bills that masquerade as a housing affordability package are more evidence that the government has no clue. They are not listening to experts. They are not listening to people in the community. they have no idea. They are seriously out of touch. In fact, they've given up, as we've seen this week with the energy package, any pretence of actually governing. Just do whatever the member for Warringah says in the party room. I notice there's a bill on the Notice Paper as well that talks about new offences for impersonating a Commonwealth officer. I'd be very worried the Prime Minister might actually be charged under that bill for impersonating the Prime Minister! This is a housing affordability sideshow—say some words and maybe someone will believe you're doing something.

The re-election strategy has started to become clear this week: burn coal for higher power prices, spread copper for slower internet, and spin crap for—well, I don't know, just because. Context, however, is important. As our second reading amendment makes clear, the government's housing affordability package is a sham and Labor's policies are superior. The context in this country is house prices keep going up, year after year, quarter upon quarter, faster than incomes. Meanwhile, homeownership rates have plummeted to record post World War II lows. You simply cannot be credible, as speakers before me have said, on housing affordability unless you're prepared to tackle the distorting, unsustainable, regressive and damaging tax concessions. These tax concessions, negative gearing and capital gains tax—indeed, the deadly, toxic combination of the two—are fuelling investor demand for established housing, and they are pricing first home buyers, people who actually want to live in the house and create a home, out of the market. The fact is it is still easier in this country to buy your second, your third, your fourth, your fifth, your 10th or your 39th investment property than it is to buy the most important one—the first. We hear about supply and demand. It is a market, so there is supply and there is demand. But the government point-blank refuses to look at demand. I say it's damaging, because no society, no sensible society, no decent society, wants to see house prices keep rising faster than incomes.

The party of Menzies, the mob opposite, get very sensitive when you talk about their patron saint, Menzies. I think it's the 5,000th year or something, so we've heard all year from his seminal 'forgotten people' speech. He had a vision for a nation of homeowners, versus today's vision for a nation of landlords and renters, with the landlords on that side of the House and the renters being everyone else. The fact is we have too much growth in prices driven by investors. This is not a leftie, communist, socialist plot; it's what every sensible economic commentator and every sensible academic tells us.

The fact is that, for a high-income earner in this country with a bit of spare cash in their pocket—perhaps due to the government's tax cut of two per cent that we got in the last budget, when we're the least deserving people in the country of getting a tax cut—the most rational thing to do on a Saturday morning after having your coffee and reading the paper is to trot down the street to the nearest auction and, with your spare cash, bid up the cost of an existing property because you get a great big tax concession which means more to you than anyone else in the country. I say it's unproductive and distorting. You'd think, with the current investment levels in the productive part of the economy, you'd want to re-engineer the tax system to encourage people with a bit of spare money to do something productive with it, like invest in a business, or a start-up, or shares—something apart from bidding up the cost of an existing property, which does nothing for the economy. I say it's unsustainable, as has been said, because the cumulative cost of these regressive tax concessions is tens of billions of dollars to the budget when we're lectured that fiscal responsibility and structural repair is needed, and I say it's regressive because overwhelmingly the benefits go to those who have the most.

This is perhaps the clue, as many speakers before me have wondered, as to why the government refuses point-blank to address these glaring problems in the budget. Every sensible economist, economic body and policy expert says change is needed, and even Joe Hockey—remember him?—and the person impersonating the Prime Minister, when he was old Malcolm, used to know that. Just like we saw with superannuation, when you strip away the pretence of care for the middle class, when you get past the waffle about, 'Oh yeah, we care about poor people; inequality is not a thing, but we're kind of a bit sympathetic to people in poverty,' they are the party of the rich. They are the party of the people who have the most. They have wealth and privilege, and reducing inequality runs against their very purpose. It is at the core of Liberal Party DNA that its members and donors jack up if it does anything to make a structural change that reduces inequality and makes things a little fairer, or if it takes away any perk or loophole that helps money flow back to those who have the most and levels the playing field.

We saw this most clearly in the last couple of years when they wrestled pathetically with the need to reform the unsustainable superannuation tax concessions—those concessions that meant you could have $15 million in an account and pay not one cent of tax. We've made that point for years and we've been clobbered over the head. We put forward sensible policy in an election. At the last minute the government went, 'All right, okay, you've got a point; let's not talk about it, but we'll pocket some savings,' and then all hell broke loose, to put it politely, in the Liberal Party. They lost donors, they lost volunteers, and they say they almost lost the election through that stopping of the flow of cash from people who pay no tax. And now the poor member for Higgins is under siege and may not even be here if the preselection challenge is successful, because Jack Rush QC left the Liberal Party and has started up the 'anti the member for Higgins group' because he thinks he shouldn't have to pay any tax. That is exactly the kind of thing that happens to those opposite, so I do understand it's difficult for them when they try to make things a little bit fairer.

I said at the start that most of the housing affordability package is a nothing package; it's actually integrity measures. That relates directly to the second reading amendment we have moved, suggesting that this is a sham. Unfortunately—and this goes very directly to the bill—not all of the housing measures are innocuous. Indeed, some of them, the supposed budget centrepiece, are truly ridiculous. They're worse than a sham because they're actually damaging, like the ridiculous scheme to bastardise the superannuation scheme. We have the first home buyer super saver tax scheme. It is a mouthful. It's like the government thought, 'We'll throw as many fun words as we can into one policy and that will be appealing to young people.' It's a bad idea. It's a bad idea because, firstly, it fuels demand—remember that old supply-demand thing we touched on earlier? It puts more cash in buyers' pockets. It gives a tax break, which again is regressive, to save up to $30,000 to put towards a house. If you increase the demand for housing in an already hot market, it can only increase housing prices. The scheme will make matters worse for young people trying to buy their first home, and the only people this scheme really helps are those who want to see prices rise even further.

I say this tax break is regressive, that r-word—making things better for people who have most and worse for those who have least—because the scheme, by its very nature, through the tax break, delivers the greatest benefit, surprise, surprise, to the highest income earners. Who knew? From the Liberal Party! It's fundamentally inequitable for those who are at the bottom of the income ladder and still dreaming of buying a home one day. The government's answer, and we've heard this story before, is to blame young people for not saving enough. At the same time that the government is already asking young people to put up with cuts to schools and universities; to pay more for a university degree; to run up bigger debts to go to uni or TAFE and then to pay their loans back earlier, when they start earning $42,000, which apparently is wealthy for this mob—who knew?—it is getting them stuck in a debt trap as they are trying to climb up this ladder of opportunity we keep hearing about, this mythical ladder. It is now asking young people to raid their retirement savings just to try to buy a house in a market that is already warped by investors. In a sensible world—the one where you listen to the economists and your advisers and all that kind of stuff—this is not only bad economic management but also ethically wrong. We are a parliament and a generation that is at serious risk of handing a lower standing of living to the next generation. That is shameful. It's no accident though. This government is complicit in this and is driving it. This scheme is also dangerous, as it undermines Australia's world-class superannuation system and hurts young Australians whose future is already uncertain, and I'm pleased and proud that the Labor Party is standing against this bill. Labor, of course, created Australia's superannuation guarantee and we will not see it undermined by the Liberal Party.

Here is a fun fact as I drift towards closing: it was this government that introduced the Superannuation (Objective) Bill 2016 to parliament, and that bill proposed to legislate that the primary objective of the superannuation system was to 'provide income in retirement to substitute or supplement the age pension'. It doesn't say anything about providing a tax break or a tax rort for people to save $30,000 towards housing, to push up the cost of housing—even though that's about one-quarter of the median price rise in the capital city markets over last year. But that bill seems to have quietly dropped by the wayside.

In the last couple of minutes of my time I'll add a couple of comments about the proposed downsizing incentives for older Australians. I'm supportive of the notion that we should encourage downsizing. My mum was one, like many, who sat in her big house that she didn't need primarily because of the stamp duty barrier. I know that some state governments are starting to think about this, but I'm not convinced that the government's current policy as expressed in this bill will achieve the desired objective.

The cruel hoax in this policy was laid bare in an excellent essay by Richard Denniss, in The Monthly a few months ago, called 'Grandfathering the Australian dream'. It looks at the consistent wealth transfer to those who already have property and are in the market away from those who are trying to get a foothold as the next generation. He said:

There is some logic to encouraging older people to downsize their residence. But to suggest that allowing older Australians to tip some of their multimillion-dollar capital gain into tax-free superannuation accounts is an effective or equitable way to help young people buy or rent a house is yet another cruel hoax.

If Australia is to be a genuinely fair nation we need to have genuine policies that are achieving genuine solutions to the housing affordability problem. First and foremost, residential property must be for providing affordable homes for people to live in, and policy has to be organised around that central objective. Fuelled by the tax system and those opposite we've ended up in la-la land, where housing has preferred tax treatment and is the destination of choice for spare capital. This is profoundly dumb economic policy by the economic geniuses opposite.

The Australian people had a clear choice in this area at the last election and will have a clear choice at the next election. We will reform the unsustainable, regressive, damaging, distorting tax concessions that overwhelmingly benefit those who already have a foothold in the property market and who continue to work to push up prices faster than incomes and so lock out young people from the hope of ever owning a house.

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

In summing up, I would like to thank all members of the House who made contributions in this debate, with some exceptions. It is quite shocking to see any political party take a view that a tax cut for first home buyers is something they cannot support—so, instead of paying money to the Australian Taxation Office, having that money redirected to savings towards a deposit for a house—and this is quite surprising to me. Nonetheless, I thank everyone on our side of the House and members of the crossbench for their contributions.

I also want to note the misconceptions—very deliberate, I suspect, in most cases and, in some cases, born out of ignorance—put forward by some members opposite. Firstly, the First Home Super Saver Scheme is not an attack on superannuation. It just provides individuals with an opportunity to save more money, voluntary contributions that wouldn't otherwise enter superannuation to be put into superannuation for the purposes of a first home deposit. Individuals' retirement savings are not a target of this measure, despite the quite disingenuous or ignorant scaremongering of some opposite. With average fund returns exceeding the deemed rate of return under the scheme, the average user will likely end up with more super in their account, not less, even after they have withdrawn those amounts to purchase their first property. And, of course, in the unlikely event that there is a market downturn, individuals' retirement savings will be protected, as they will have full control over the amounts that they withdraw.

Secondly, this is not an inflationary measure. In fact, it's obviously Labor's ill-thought-out negative gearing housing tax that will actually push more first home buyers out of the market, because that, as we know, will hike up rents and will confine all new developments, which are typically the province of first home buyers, as being the only place that investors will go, being the only place that tax-preferred status will exist. So it will do quite the opposite.

Thirdly, members should be assured that all contributions will be tracked by the ATO through monthly reporting requirements. I want to reassure members that this measure did commence on 1 July and voluntary contributions made since then will be eligible for release after 1 July 2018. It's clear from his statements that the member for McMahon just doesn't understand the measure, because his focus has not been on the legislation but instead on the Facebook posts of the Treasurer, which was one of the more curious contributions to the debate.

In summing up, the First Home Super Saver Scheme will of course help young Australians to get into the housing market by letting them build up a bigger deposit inside superannuation. Every dollar less that they have to pay to the tax office, which they can put into that superannuation account that will then be used as a deposit for their first home, is surely something that every single person of good conscience in this House should support. The scheme is based on providing a tax cut to additional voluntary savings and the additional benefit of higher earnings inside superannuation, compared with what you can get through a standard saving account, which we know is what prospective first home buyers use when saving for their deposit. Again, it won't negatively impact on first home buyers' retirement balances, because it's not based around the release of existing contributions: it just relates to voluntary additional contributions of sums that would never find their way into super in the first place. We know Australians are entering the housing market later in life than in previous generations, and with house prices high difficulty saving a deposit is clearly the biggest barrier to getting into the market. That's why these changes are essential and why we need to act now.

The second aspect of this bill, which I was quite surprised to hear negative comments about from those opposite, is that older Australians will also be given flexibility to contribute proceeds of the sale of their home into superannuation. This, self-evidently, will help free up housing stock, in particular larger homes, for younger, growing families, because it will reduce the barriers for older Australians downsizing from homes that no longer meet their needs. The downsizing measure is intended to assist people aged 65 and over who are currently unable to contribute proceeds from the sale of their home into superannuation because of the restrictive existing caps. Fiscal restraints make allowing any exemption from the age pension means test much more difficult to achieve than this measure. These changes were announced in the budget and this bill gives effect to those announcements. I therefore enthusiastically commend these bills to the House.

Tony Smith (Speaker) 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. The immediate question is that the amendment moved by the member for McMahon be agreed to.