What a difference a year (and an election) makes!
When the 2025 Budget was delivered it was only a few weeks before a Federal Election. I was cynical when changes hadn’t been made to CGT, Negative Gearing, or the Taxation of Trusts. So, we went to an election on the Treasurer and PM’s promise that if re-elected, the Government would not interfere with these tax settings.
But a promise means nothing to a government with a huge majority, and so the Treasurer now thinks he has a free hand to attack these areas of the tax system because “my budgetary measures will address a housing crisis”.
But why is there a housing crisis. The contributing factors are several and complex – we see this firsthand through the experiences of our clients.
The problem starts with the cost of land development and construction. Material and labour costs have nearly doubled post Covid.
Then there’s an extreme trade and skills shortage across the whole building sector. This can be traced to changes over the last 25 years in apprenticeship training – Federal and State Governments have abandoned the building industry with the mass closure of TAFE campuses.
Further, Governments at all levels are adding huge compliance and cost pressures to the property supply chain. This commences with multi–Stamp Duty takes, Council Contributions, Headwork and Infrastructure charges, and GST etc.
Our practice is involved with clients in regional NSW who have developed residential land targeting the first homeowner. After two years that land is mostly unsold because the cost of constructing a home is too high. In a major regional city, the Local Council developed 250 residential lots for sale – after 3 years the majority remain unsold for the very same reason.
These factors are creating extreme supply constraints and affordability challenges. They have nothing to do with negative gearing – in fact negative gearing has been shown to assist supply.
In addition to cost increases, potential first home buyers are spooked by interest rates that have moved from say 2.75% to 6.5%, all at a time when many are trying to make ends meet in a cost of living crisis whilst often paying off a student HELP debt of more than $50k.
Come on Treasurer – let’s be honest. Your changes to CGT, Negative Gearing and Taxation of Trusts have very little to do with housing affordability. Last night’s changes are a tax grab and an attack on aspiration and long-term investment. Otherwise, how can you justify introducing CGT on forward gains for assets acquired before 1985.
There’s much to play out over coming months as these measures are debated through Parliament. Hopefully, amendments will remove some draconian and inequitable changes like the taxation of trust income at 30% with no offsetting tax credit for distributions made to a corporate beneficiary.
I strongly urge clients hasten slowly until legislation emerges and we can carefully consider how to best deal with your specific circumstances.
In the meantime, I refer you to the detailed overview provided by Chartered Accountants Australia and New Zealand on the 2026-27 Federal Budget.
I hope you find this helpful, and if you have any queries, please feel free to contact any of us at Edney Ryan on (02) 9908 9888.