In his farewell speech to the federal parliament, former Treasurer Joe Hockey has back flipped on the treatment of negative gearing, saying the tax break needs to be reformed.
In his parting speech, the former Treasurer took the opportunity to critique the Australian tax system, saying it lacks integrity.
“Mr Speaker, our taxation system needs reform for the 21st century economy, integrity is crucial for that and through our leadership of the G20 we hardened the resolve of major economies to address base erosion and profit shifting,” he said.
“Integrity is hugely important but the best way to get compliance is to have lower, simpler taxes. We abolished seven taxes and fixed 96 tax problems but reform had to go further and through a comprehensive review of the tax system.
“I endeavoured, and failed, to keep all options on the table.”
According to Hockey, one of his failures includes the treatment of negative gearing – the tax break for investors which has widely been blamed for generating speculative property investment and pushing up house prices.
“In that framework, negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property and we should never ever forget small business,” Hockey told the federal parliament.
This is indeed a backflip for the former Treasuer, who has previously argued that negative gearing does not cause speculative investment. In the federal government’s tax discussion paper, released in March by Hockey, he stated that the decision to invest in housing is more about Australia’s capital gains tax arrangement rather than the tax treatment of negative gearing.
Hockey then vowed there would be no changes to negative gearing after shadow treasurer Chris Bowen raised the issue In April during an address at the National Press Club.
“We’ve seen numerous policy failures in relation to taxation. If you change negative gearing, then there are significant flow-on consequences from people that rent homes, and that needs to be properly considered,” Hockey said.