would have actually benefited the majority of investors<\/a> if it had been in place between 2008 and 2025.<\/p>\nThe analysis of 920,000 housing investments between those years estimates that capital gains tax changes would have lowered the amount of CGT paid for 54 per cent of investments and increased it for 42 per cent.<\/p>\n
Meanwhile, the negative gearing changes pull in the other direction, lowering rental income tax for 28 per cent of investors and increasing it for 49 per cent.<\/p>\n
While only a narrow majority of investors would pay more tax overall, the research predicts that government tax revenue will rise noticeably, driven by the highest-performing investments.<\/p>\n
\u201cThe new way of taxing CGT is likely to raise more revenue for the budget bottom line, mainly coming from high-return investments\u201d said e61 Institute Senior Research Economist Elyse Dwyer.<\/p>\n
\u201cIt ties the tax bill more closely to the actual size of an investor\u2019s gain, so small and negative returns are taxed more lightly and large real gains are taxed more heavily.<\/p>\n
\u201cThat also brings down the overall riskiness of housing as an investment, because large positive and large negative returns get pulled closer to the middle.\u201d<\/p>\n
The analysis finds that investors with high leverage, or with little other taxable income such as retirees, are the most likely to pay more tax under the changes.<\/p>\n
The paper also finds the new tax settings maintain the incentive for investors to borrow as much as possible.<\/p>\n
\u201cThis incentive could be removed by indexing tax deductible interest costs in a similar way to capital gains,\u201d said e61 Research Manager Nick Garvin.<\/p>\n
Mr Garvin, in a piece for The Conversation, said the estimates suggest the impact on housing investor taxes will be less dramatic than many headlines have made out.<\/p>\n
\u201cAfter July 1 next year, the majority of investors are likely to pay more in tax, but it may be a slim majority,\u201d he said.<\/p>\n
\u201cInvestors are unlikely to know whether they\u2019re in tax rise or tax cut territory. It\u2019s mainly determined by the size of their capital gain, which is unknown until they sell. Like stock returns, capital gains are unpredictable.<\/p>\n
\u201cUnder these reforms, the downside is there now appears less prospect of high after-tax gains. But on the upside, there is also less chance of large after-tax losses. So how investors will react to these tax changes from July next year will depend on their personal preferences around risk.\u201d<\/p>\n
The government meanwhile says its changes are all about intergenerational fairness.<\/p>\n
In a podcast with Michelle Grattan, Treasurer Jim Chalmers said it was too early to say whether the tax reforms will be a success.<\/p>\n
\u201cThere\u2019s been some lending data from the ABS, and from the Reserve Bank, I think it\u2019s probably about a month ago now where there were some encouraging early signs,\u201d he said. \u201cBut I would caution patience on this because we have said for some time that the impact of our tax reforms in the housing market and elsewhere should be judged over the course of the next few years, not the last few months, and we have seen the beginnings of some encouraging signs, but because (there are) so many other things playing out in the housing market at the moment \u2013 higher interest rates, for example, economic conditions more broadly, seasonal factors.<\/p>\n
\u201cThere\u2019s a whole bunch of stuff playing out in housing. And so we don\u2019t get too carried away in either direction. Housing is a long-term investment that people make, and people should judge our policies over a longer period as well.\u201d<\/p>\n
The two assets booming after tax changes<\/p>\n
Australia\u2019s major super funds have revealed a surge in members making extra contributions as the government\u2019s negative gearing and capital gains tax overhaul pushes more people to the tax-effective retirement structure.<\/p>\n
AustralianSuper, the country\u2019s biggest super fund, saw voluntary contributions increase 35 per cent in June compared to the previous year, with the spike continuing through July and August.<\/p>\n
MLC reported additional contributions increasing by 35 per cent between May and August this year, compared to the same period last year. The surge is understood to be worth hundreds of millions of dollars.<\/p>\n
Leading financial adviser Alex Jamieson told news.com.au he was having similar conversations with clients on the back of changes announced in the budget.<\/p>\n
\u201cIt does open that conversation up around super, [which] was largely unaffected by the budget changes in terms of capital gains tax,\u201d he said.<\/p>\n
\u201cTo some degree it is a tax incentivised savings scheme. If we\u2019re thinking about the arithmetic on the capital gains, you keep 90, the government takes 10 on a realised gain after 12 months. It\u2019s very attractive.<\/p>\n
\u201cAnd then also the lower tax rate of 15 per cent on accumulation balances, compared to 30 per cent, does really open up a lot of people to start thinking, do I revisit the strategy around what I\u2019m doing?\u201d<\/p>\n
Along with superannuation, Mr Jamieson said the budget changes had made people\u2019s principal place of residence more attractive as well.<\/p>\n
Your main residence is exempt from capital gains tax, which means some may be incentivised to undertake renovations or improvements to their property.<\/p>\n
\u201cUnder the current property market with low clearance rates and most of the eastern states experiencing declines in values and projections that may play out a little further, it does change the conversation a little bit around if that investment property opportunity is more limited to focus on your primary residence and get that tax benefit,\u201d Mr Jamieson said.<\/p>\n
Biggest losers<\/p>\n
Investment expert Chris Brycki put together a \u2018best to worst\u2019 list of assets for Australians to build wealth as a direct result of Labor\u2019s tax changes.<\/p>\n
He echoed other experts by putting the family home and superannuation at the top, as well as dividend-focused Australian share ETFs.<\/p>\n
At the bottom of the list, he put crypto, gold and established investment property.<\/p>\n
He wrote in The Australian that crypto and gold would be hit hard because almost the entire return comes from capital growth.<\/p>\n
\u201cThere\u2019s no income, no franking and no pooled structure to soften the tax treatment of individual winners and losers,\u201d he said.<\/p>\n
\u201cEstablished property is hit from both sides. Investors buying established homes now face narrower negative gearing rules. Losses will generally be quarantined against residential property income and gains rather than deducted against wages. Future real capital gains will also face the new CGT regime.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Business heavyweights and top economists are ramping up pressure on the Albanese government to scrap its controversial 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