Transcript: WA Housing Hub Discussion Forum
Taxation and Housing
Tuesday 19 May
Background:
This discussion forum on housing and taxation is due to commence at 1:30pm WST. National
Shelter's Executive Officer, Adrian Pisarski, will be facilitating this discussion. Adrian brings a wealth of knowledge to this topic and will provide insight into this important issue. Please find links to recently released research exploring housing and taxation:
 Taxation Discussion Paper, Re:think
 ACOSS Research Paper, Fuel on the fire: negative gearing, capital gains tax & housing affordability
 Senate Inquiry Final Report on Affordable Housing
If you are having trouble registering for this forum, or need any other assistance with the WA
Housing Hub, please email info@wahousinghub.org.au
.
Jennifer - Shelter WA:
Good afternoon everyone and welcome to today's discussion forum on taxation and housing, with our guest facilitator, Adrian Pisarski from National Shelter.
Adrian will commence the discussion by giving a short background to the issues then it will be your opportunity to participate in the discussion and ask any questions you may have.
Thanks Adrian - over to you!
Adrian P:
The Abbott Govt has called for submissions on tax reform as part if its national agenda. It follows the
Henry tax review in 2012. The news has been dotted with stories about the effect of negative gearing and Capital Gains Tax CGT discounts or exemptions on house price and rental affordability so its topical if not sexy.
National Shelter has long argued for CGT reform and some re-tasking of negative gearing so we get a better outcome from the billions of tax dollars foregone or expended on housing, others argue not to worry about that but to focus on an annual wealth tax.

Regardless for this like me its an interesting discussion and as I am writing our submission to the tax inquiry I'm interested in views. welcom to the discussion
Shae – Shelter WA:
The ReThink Tax Discussion paper suggests that the majority of tax filers with negatively geared properties fall into the middle income bands. However, research done by ACOSS shows that those figures are misleading because they use taxable income and many households that appear to be middle income actually have higher incomes before deductions – such as negatively geared property
– are subtracted. The ACOSS paper suggests that over half of taxpayers with geared rental investments earn over $100,000 and 30% earn over $500,000. Your thoughts, Adrian?
Adrian P:
Its interesting as many moderate income families do negatively gear property but the figures also show the income AFTER deductions are taken into account so incomes would be, on average, higher than some reports. The real issue is about who the benefits accrue to mostly and that is high income earners who as ACOSS suggest get the lion's share of the benefit.
Our interest though is more in what outcomes do tax payers, filers and low income tenants get from the current arrangement and what could be done to improve the outcome.
Jennifer – Shelter WA:
Thanks for your participation Adrian.
Negative gearing has been the subject of a lot of media and political attention in recent months. Do you think this issue has become so politicised by both sides of the political divide that we have lost control of the policy debate?
If so, what approach should the National Shelter Network be taking to refocus attention on the impact of negative gearing on housing affordability?
Adrian P:
The real problem here is that negative gearing and CGT exemptions are supposed to have two effects:

a.
To produce more supply as they attract investors b.
To lower rents to tenants as investors are depending on a capital gain over time rather than high rental returns
Neither seem to be the case.
Adrian P:
I don't think we ever had control of the policy debate but I'm not sure anybody does. For National
Shelter I think we have to engage in positive dialogue with everybody including the property bodies because there is hopefully a way of using the current level of tax expenditure to get a better outcome. It means participating in forums, discussions, meetings and trying to get more national attention on the issues.
We are looking also at how the existence of tax benefits may have skewed issues at the capital city and state level and for state governments who will be facing much larger investments as a result of the inflation which is causing the discussion.
Robert – Shelter WA:
Capital gains and negative gearing discounts and exemptions have seem to become an entrenched part of the Australian tax system, with many households taking advantage of these benefits. Is it wise for a government of the day to change these policies which will have such negative political ramifications?
Adrian P:
We probably need to separate the discussion into two categories, tax policy and politics.
In terms of how many households currently use these benefits any change would need to be as of a point in time and honour current arrangements until a property was sold. It would not be fair on this who have used the facilities in good faith to have retrospective changes.
So it is more about is it a problem and what would we do about it.
Cynthia T:
Are the impacts of negative gearing very different in regions than in big cities?

Jennifer – Shelter WA:
The Senate Inquiry’s final report into affordable housing proposed a series of recommendations to adjust the negative gearing arrangements, including limiting the application of negative gearing arrangements to a certain number of properties or new housing stock or designated affordable housing stock.
What are your views on these recommendations and efforts to contain negative gearing to certain sections of the housing market?
Adrian P:
Hi Cynthia and there are regional differences.
If the benefit is really about capital gain but also mitigated losses then it is eventually about the size of the capital gain. In some mining regions where price may be very volatile some investors may not get the capital gain or get a very high gain. It is about writing down losses every year but getting the real gain over time.
In general capital cities is where long term capital gains are realised whilst in regional centres the gains and losses might be over shorter times and higher or lower.
Also in response to Rob.
E.G Moody's in one report estimate that negative gearing adds about 9% inflation to house prices.
The issue become: a. Are we excluding a generation from home ownership? b. Will our children be able to afford to live near us? c. What about intergenerational equity?
Adrian P:
I think there is real merit in allowing negative gearing for new supply, not so sure about limiting the number of properties.
The big problem we face is a lack of supply and investors invest (92%) in existing property rather than new. If we want to get new supply which would also free up some frustrated ownership in existing supply I think that is a positive direction.
Shae – Shelter WA:
Now that Round 5 of the National Rental Affordability Scheme (NRAS) has been abandoned, what options are there to increase institutional investment in affordable rentals?

Adrian P:
It's a difficult question. The short answer is none. NRAS was the only vehicle which was beginning to attract large scale institutional investment. The idea of an affordable housing bond and with it an affordable housing finance corporation have merit but could have been done by pursuing, expanding and building NRAS.
The difficulty is getting certainty for investors and developers and institutions, we now have an on/off response from government which may be difficult to address and get investors back at the table.
Adrian P:
Cynthia which region are you from? If you are
Cynthia T:
Tasmania. It is all regional and/or rural.
Adrian P:
I should also note that despite round 5 of NRAS being abandoned there are still NRAS incentives allocated this year and so the scheme will still run for 10 years yet and within that time there may be opportunities to revise it.
Shae – Shelter WA:
Shifting from Federal to State taxes, most States are dependent on revenue collected from stamp duty, but stamp duties are widely regarded as inefficient, stifling movement in the housing market and increasing the cost of housing. What are your thoughts on changes to transactional taxes on housing such as stamp duty?
Adrian P:
One issue with the senate recommendation to limit the number of properties is that we need new supply and at scale so I think it kind of goes against that. I think the intent is to limit the benefits which accrue to high income households who may afford multiple properties but I'd like to see larger scale investment supported by a changed tax arrangement which specifically targets affordable rental.

Adrian P:
Stamp duty is volatile in that states get a lot of it when property markets have high turnover and are rising, but very little when they are not. A land tax, especially broad based is more predictable and also not inflationary or even anti inflationary compared to stamp duty. Stamp duty also inhibits mobility, downsizing etc, however is a major source of revenue for states. the ACT has moved to transition from stamp duty to land tax and provides a model for state to look at but so far no states have followed.
Adrian P:
Tasmania is probably one of the least affected parts of Australia in terms of neg gearing and CGT but is also very affected by stamp duty and would benefit in the long term from land tax.
Jennifer – Shelter WA:
Has there been much analysis of the impact on housing affordability of the change to land tax in the
ACT?
This is something Shelter WA has recommended previously to the Western Australian Government and it would be great to draw on an evidence base to support our recommendations.
Adrian P:
Also I love Hobart and it's hardly rural and others would also cite Launceston as almost urban!
Adrian P:
The land tax change will take 20 years to complete and is deliberately slow in terms of trying not to have adverse impacts. Also the ACT has different land title arrangements, long term leaseholds which probably make it easier. It may take a few years before we see the benefits of the shift which should be lower house price inflation and steadier revenue for the ACT.
I haven't seen any studies yet.
Jennifer – Shelter WA:
Thanks Adrian. Are you aware of other States and Territories that are open to the transition from stamp duty to a land tax?

Cynthia T: yes, Hobart is lovely! For Tas in general, it makes sense that the effects of neg gearing would be like regional areas of the mainland, rather than like the big mainland cities.
Adrian P:
Not at this stage, but at the Tax Forum in 2012 Queensland and NSW were to look at changes and harmonisation across states but then their governments changed and so did the federal one.
Robert – Shelter WA:
Adrian, how best do you believe NFP can make a difference in the policy debate? We make plenty of submissions to government about these issues, which often go unheard. If it is about changing public mindset, should we be focusing more on media, and especially social media to put forward these arguments which will in turn influence the political debate?
Adrian P:
I think the submissions are important they are a public record and they do get looked at. I also think we have a responsibility to try to get greater media coverage focussed on the negative impact on low income households but we also have to make it a general problem. It is a problem for all sorts of households but we focus almost exclusively on the low income which research suggests can be a turn-off for the rest of the community.
But if a family is well off but with all their children still living at home and unable to start their lives properly its a much greater issue.
We also have to reassure investors we are not on about making them pay. They may have adjustments over time but the system will be the beneficiary and so will the whole community.
The message should be general with specifics in it rather than just about poverty and disadvantage.
Jennifer – Shelter WA:
Thank you very much Adrian and thank you to our participants in today's discussion forum.
If you have any further questions for Adrian, please do continue to add them to the discussion thread or email them to info@wahousinghub.org.au
.
For your information, we will provide a printable transcript in our next newsletter.

Adrian P:
I was in the UK looking at these issue and Shelter UK had commissioned research which said that every time they only talked about homelessness among the lowest income/highest need people turned off. Every time they talked about housing as an intergenerational problem affecting everybody they got more interest. That will also be the case for social media I reckon.
Cynthia T:
Thanks!
Adrian P:
Thanks Cynthia and Shelter WA for hosting