Treasury secretary Jenny Wilkinson admits 35K fewer homes under Labor’s capital gains, negative gearing plan

Treasury chief Jenny Wilkinson has conceded Labor’s changes to negative gearing and capital gains tax concessions would mean 35,000 fewer homes and admitted forecasts of $2 a week cheaper rent ignored the effects of investors selling properties.

“The direct impact of the tax changes might reduce supply by a bit but that would be more than offset by what we estimate to be the impact on supply of the additional infrastructure measures which were also announced in the Budget,” she told the Senate economics committee on Thursday.

“If those changes were not made, then there wouldn’t be a switch of investors out of home ownership which makes more houses available for first homebuyers.”

Ms Wilkinson also admitted that Budget forecasts of falling rent didn’t factor in the effects of investor landlords selling properties, potentially reducing the availability of rental stock or housing supply for tenants.

“Our best estimate is that rents would be slightly lower – about $2 per week lower as a consequence of just the tax changes,” she said.

“That doesn’t take into account the broader impacts on supply.”

The Treasury Budget papers admitted weaker house price growth would mean 35,000 fewer homes over the coming decade as a result of Labor’s plan to restrict negative gearing to brand new homes from July 2027, and replace the 50 per cent capital gains tax discount with a minimum 30 per cent tax on inflation-adjusted gains for existing properties.

“Lower house price growth will have a modest impact on housing supply, with the increase in supply over the next decade expected to be only around 35,000 dwellings fewer compared to no tax policy change, equivalent to around a quarter of a per cent of the current dwelling stock,” it said.

The Budget papers also forecast Australia having 75,000 more owner-occupiers in the housing market during that time based on policies to boost supply, which Finance Minister Katy Gallagher argued meant a net increase of 30,000 homes, citing Treasury documents.

“There would be an increase in net supply which would be available to first homebuyers,” Ms Wilkinson said.

But the Treasury secretary also conceded the Federal Government was too reliant on income tax revenue, noting younger people overwhelmingly relied on wages to save up for a mortgage deposit.

“My understanding is that most young Australians earn most of their income through wages and salaries,” she said.

Personal income tax is expected to make up 51.9 per cent of Federal Government revenue in 2026-27, or $382.4 billion out of the $737.1 billion in tax receipts.

Labor is resisting Opposition Leader Angus Taylor’s plan to index marginal income tax brackets.

The working age population bears the financial brunt of the income tax burden as capital gains tax concessions for property investors benefit older Australians.

Ms Wilkinson described this as an intergenerational issue, when questioned by 22-year-old Labor senator Charlotte Walker.

“In relation to intergenerational equity, there are really three sets of issues which are raised,” she said.

“The second issue that’s raised, in terms of a policy challenge, is the pressure within the tax system on personal income tax, personal income taxes going forward in terms of the pressure within the system to use personal income taxes as part of revenue raising in order to fund government Budgets.”

Senator Gallagher has accused Liberal senator Claire Chandler of being patronising after she pointed out Labor’s capital gains tax changes aren’t a complete reversion to what existed before September 1999.

Senator Chandler noted the original capital gains tax, in place from 1985 to 1999 before a 50 per cent CGT discount, didn’t have a minimum 30 per cent tax and cited Prime Minister Anthony Albanese telling Parliament on May 26 that “we are also changing the capital gains tax regime to go back to 1999”.