Prime Minister Anthony Albanese is under intense pressure from his largest union supporters to implement tax policy changes a la 2019. The Australian Council of Trade Unions would like negative gearing to be restricted to one investment property.
It also requires the capital gains tax discount to be reduced to 25 per cent as opposed to 50 per cent. These actions at one time contributed to the loss of Bill Shorten in the federal elections. Albanese is currently receiving backlash regarding the tax plan, as unions are demanding tax reform as a solution to the issue of unaffordability in housing.
Unions claim that the existing taxation system has been biased against workers in favour of property investors. Secretary of ACTU Sally McManus said employees pay all their income tax using PAYG. According to her, wealth and windfall profits are overtaxed. According to McManus, investors are benefiting through tax concessions, which is forcing money into property rather than house building. This, she argued, weakens the growth of wages and increases the prices of houses.
The property price statistics demonstrate that there is a high pace of growth of the prices in most cities. Last year Perth values have increased by 17.5 per cent. The prices in Brisbane rose 14.4 per cent. Adelaide climbed 13.8 per cent. That 17.5 per cent increase on a typical 750,000 home in Perth represents an approximate gain of 131,000. The price of Brisbane houses skyrocketed by 149, 000 in a year. The majority of the workers in Queensland do not make it with such an amount in a year.
An aerial view of congested suburban houses in Sydney emphasises the strain on the housing market. [Bloomberg]
What Tax Changes Are Unions Calling For And Why?
The unions demand tax reform since the employees are experiencing increasing housing expenses. The reforms of negative gearing are geared towards lowering speculative investment.
The reduction of the capital gains tax discount is supposed to restrict the profits made in investments. Advocates believe that it would reduce pressure and enhance affordability. Unions feel tax concessions to property investors put common people in disadvantages.
McManus explained that employers who desire less pressure on wages should lend support to the housing act. According to her, high rents and the cost of houses are eroding wages. The union marked large-scale wage campaigns this year.
A pay increase is going to be demanded by workers because rents and mortgages are having a toll on household finances. Most Australians are unable to live in areas close to their workplaces due to the cost of houses.
Could These Tax Changes Repeat Past Political Errors?
The 2019 review of Labour itself concluded that the backlash against tax reform was not only due to the policies. The review commented that the potential voter risk was brought about by bundling tax changes with more than $100 billion in spending announcements. The economically insecure voters were not very secure about the economic management of Labour.
The reforms suggested are reminiscent of those that have contributed to Labour’s loss by Labor seven years ago. The campaign of Bill Shorten was criticized by the negative gearing and changes in franking credit. There were warnings by many analysts that these plans scared the traditional Labour voters off. Political risk is still high against Albanese now that unions are pushing similar ideas again.
Other economists have given warnings that the changes may reduce housing construction. Such reforms were proposed in 2019 by an analysis by Deloitte, which estimated a 4.1 per cent decrease in housing construction. It also estimated a decline in GDP of 1.5 billion anda loss of 7800 jobs. The analysis indicated that the influence of prices alone could not address the issue of affordability. It proposed the restricted investor movement to the homeowners by 2030.
ACTU Secretary Sally McManus is seen talking about pressure on tax reform in Canberra. [The Australian]
How Do Polls And Parties Respond To The Debate?
One Nation has recently topped the polls and holds the primary vote intentions ahead of the Coalition. Recent polls indicated that One Nation registered 22 per cent and the Coalition registered 21 per cent. A two party preferred basis, Labour remains 55 to 45 ahead. Those numbers, however, may alter because of housing issues. Voters who are economically insecure are responsive to housing and cost-of-living issues.
The Reserve Bank of Australia is still monitoring inflation and employment. Increasing rent and low increases in wages make economic decision-making more difficult. The issue of housing affordability has taken centre stage in politics. All major parties are now subject to criticism on what to do to repair it.
What Are The Stakes For Albanese And Labour’s Future?
Affordability of housing is a political hot potato even before the coming federal election in 2028. Albanese has to choose whether to support union tax reform requests or oppose them. Backing union demands may divide bigger voter bases. Ostracising them would also lose traditional Labour supporters.
Reform is also supported by housing lobby groups. Everyone’s Home called on the budget to be heavily tax-reformed. Its spokesperson opined that investor tax breaks contribute to aggravation of the housing crisis. They claimed that billions are spent on investor concessions other than affordable rentals. This widens the political gap.
The Federal Parliament House towers above Canberra, polarising the policy of housing. [Wikipedia]
As the One Nation party goes on the ascendancy and daily increases in housing prices, Albanese is at a critical juncture in his politics. The decisions of the year would have an impact on the housing situation in Australia and the future of Labour.
Also Read: IRS Tax Refund Deposit Schedule 2026: Check Amount And Estimated Dates
FAQs
Q1: What does limiting negative gearing mean?
A1: It means property investors can only claim tax deductions on one investment property.
Q2: Why is the capital gains tax under scrutiny?
A2: Reform aims to reduce the tax discount from 50 per cent to 25 per cent to curb profit-driven investment.
Q3: How might these changes affect housing affordability?
A3: Supporters claim it could reduce speculative demand; critics say impacts may be small and slow.
Q4: What political risk does Albanese face?
A4: Backing these tax reforms could repeat past electoral backlash on similar policies.
