While negative gearing gets all the hate, it really was John Howard who destroyed our housing market by handing out a big tax-free gift to property investors.
Prior to June 2000, if you made a capital gain (ie a profit from an investment) you discounted the profits by the level of inflation over the period of the investment before paying tax.
Then Howard (and Costello) changed it to being a straight 50% discount.
If you bought a property for $500,000 and 10 years later you’re able to sell it for $1m at a profit of $500,000, rather than pay tax on the whole $500,000, you only pay tax on $250,000. The other $250,000 is yours, tax free.
That is about as sweet as it gets.
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At some point you have to admit what you’re doing has not worked. Or perhaps we need to admit that the aim all along was higher house prices.
Howard infamously said in 2003: “I don’t get people stopping me in the street and saying, ‘John you’re outrageous, under your government the value of my house has increased’.”
The tax policies he put in place worked. They ensured house prices would go up much faster than income and reduce affordability. Maybe it’s time to admit that if we keep them in place that situation will continue.