House tax plan slammed
The Federal Government has entertained the idea of making owner-occupiers’ home mortgages tax deductible.
This week, the new assistant minister to the treasurer Michael Sukkar, whose responsibilities include housing affordability, told Sky News that the government wanted people to have a “realistic opportunity to save and purchase a home”.
Sukkar was asked whether the government would copy the US system, which allows owner-occupiers to deduct the cost of their mortgages from their tax bill
He said there was no “silver bullet” for housing affordability, including that option.
Asked if he would rule out the idea, Sukkar said; “I will examine, and I know that the treasurer will look at, all good ideas.
“But I am not going to announce them the day after I’ve been announced as assistant minister to the treasurer, so we’ll have more to say in coming months.”
Grattan Institute chief John Daley said the possible deduction for owner-occupiers was “one of the sillier policy ideas I’ve heard in a long time” and ignored distortion caused by negative gearing.
He pointed to Grattan Institute modelling in 2013 which showed a new tax deduction would cost up to $19 billion a year.
Daley said deducting mortgage costs would “only make sense” if capital gains tax was applied to homes.
But even then, capital gains tax would barely recoup the cost of the new deduction and cost of the transition.
He said the risk may not match the reward, as tax deductions for home owners were a contributing factor in the US housing market collapse and subsequent global financial crisis, as owners kept their borrowings high rather than repay their mortgage.
“I don’t think it’s going to help first home buyers that much because it also increases how much existing home owners are prepared to pay for their next house,” Daley said.
“Getting rid of negative gearing would be a much cleaner way of improving housing affordability.”