Senators

I want to begin with a simple proposition.

Australia does not have a tax concession problem.

Australia has a housing supply problem.

And unless this Committee is prepared to confront that reality directly, this inquiry risks becoming a distraction from the structural causes of the crisis.

The submission provided by the Housing Industry Association sets out in detail the modelling evidence. Removing or restricting negative gearing or the capital gains tax discount reduces dwelling starts, reduces GDP, reduces construction employment, and increases rents over time.

That is not conjecture. It is consistent with economic theory, historical experience, and economy wide modelling.

But today I do not want to summarise that submission. Instead, I want to ask a more fundamental question.

Why are we here debating the taxation of investors when governments are extracting close to $200,000 in taxes and statutory charges from every new home built in this country?

The GST alone adds roughly $100,000 to the cost of a new house and land package. It applies to new homes. It does not apply to established homes.

If the concern is housing affordability, why is the tax system penalising housing?

Why is new housing treated as a revenue base?

If this Committee is serious about intergenerational equity, then it should begin by examining the taxes embedded in the cost of construction, not by examining long standing principles of tax neutrality.

Negative gearing is not a concession. It reflects the basic definition of net income, allowing legitimate costs to be deducted. The Henry Review made that clear and recommended against removing until the supply problem is fixed. 

The capital gains tax discount replaced indexation. Without some mechanism to account for inflation, you tax nominal gains, not real gains.

There may be legitimate debate about the rate. There is not legitimate debate about the principle.

More importantly, the focus on investor taxation assumes that investors are the cause of the shortage.

They are not.

Investors build approximately one third to forty per cent of new homes in Australia in recent years. 

Remove them, and you remove supply.

I have been here before and explained why a 25% discount rate on established homes will reduce supply. You have seen numerous modelling reports conclude the same. 

If the objective is to encourage investors to build new housing, there are constructive levers available.

For example, depreciation schedules. Currently, investors can depreciate new construction over decades. If the policy goal is to increase new supply, then accelerate depreciation, compress it from forty years to five. That does not reduce lifetime revenue to government. It brings revenue forward because more homes are built sooner.

Every additional home built generates tax revenue across GST, payroll tax, stamp duties, income tax from workers, company tax from suppliers.

If you want more revenue from housing, build more homes. More homes means more revenue. More homes means slower home price growth. More homes means fewer investors in the market as they leave in an orderly fashion for other investment opportunities. 

Fewer homes mean fewer jobs, fewer taxpayers, higher rents and more investors in the housing market.

If the government were to build 1.2 million homes, they would raise an additional $50 bn in tax revenues, enabling them to invest in infrastructure to build even more homes, solving the affordability problem and investors would leave the housing market. 

There is a tendency in the public debate to assume that raising taxes on investors will rebalance the system in favour of younger Australians.

In reality, restricting supply locks in capital gains for existing owners and constrains entry for those who come later. It would embed the inequity that exists now for decades to come.

If we build 800,000 net additional dwellings over five years, as we forecast, but household formation exceeds one million, prices rise regardless of the CGT rate. Investors will make even greater profits. 

That is arithmetic, not ideology.

Demand is driven by population growth and household formation. Supply is constrained by land release, infrastructure charging, regulatory delays and tax layering.

The result is scarcity. And scarcity always capitalises into higher prices.

So, I would respectfully suggest that this Committee ask itself a harder question.

If the objective is affordability, why is the inquiry framed around penalising investment rather than expanding supply?

Why are we debating how to tax housing more heavily when governments are already deeply embedded in the cost base of every new home?

If you want lower prices, you need more homes.

If you want lower rents, you need more rental stock.

If you want stronger public finances, you need more construction activity.

The path to all three runs through supply, not through higher taxes on the private capital that funds it.

Thank you.

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