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Retro budget cements higher tax and spend

By Graham Young - posted Thursday, 11 May 2017


These measures are bad news for the economy and the average Australian, but not so bad for those who are internationally mobile and can work anywhere.

Not such bad news either for centre-right think tanks, like us, whose business is advocating for good policy. It seems that we’ll have plenty to do for the near term, no matter whether it is a Labor or Liberal National Party government.

I wish it weren’t so!

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Finally I want to turn to housing affordability – a policy area where we have made a big contribution. (See here, and here and here for example.)

At least the government hasn’t followed Labor’s lead and won’t be rolling back negative gearing – apart from some tinkering around the edges with depreciation and travel – or capital gains. (In fact it is actually making taxation of capital gains 20% less onerous for investors in affordable housing).

It recognises the real problem for first home buyers is the deposit, and this won’t be cured by trying to drive investors out of the market (and thus making the rental market more expensive and the task of saving a deposit even harder).

But its solution is much more complex than it needs to be, and far less effective than it could be. Our proposal is to allow first home buyers to access money from their superannuation, in addition to their own savings.

This is simple and recognises that owning your own home is an essential part of retirement planning. It is also good investing as our yet to be published research shows that over the last 5 years, owner-occupied housing beat superannuation as an investment hands down (anywhere up to three hands down actually).

What the government has proposed is that in addition to normal superannuation payments, you can deposit an ear-marked additional $30,000, which attracts a 30% tax rebate on withdrawal, so it will be essentially tax free for lower wage earners.

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It has problems.

The tax effective nature of it means that the government is subsidising the first home purchase.  Our alternative involves using only the purchaser’s own money.

And it will only marginally increase the savings rate. $30,000, even augmented by some of the state government deposit gap schemes, is not enough for a deposit. The saver will have to put aside significant additional monies, but there will be no tax incentive on this.

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About the Author

Graham Young is chief editor and the publisher of On Line Opinion. He is executive director of the Australian Institute for Progress, an Australian think tank based in Brisbane, and the publisher of On Line Opinion.

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