Family home more than a sacred cow

Much of the debate about the exemption of the family home from capital gains taxation is narrowly focused and ill-informed according to the Housing Industry Association (HIA), Australia’s largest building industry association.

“Governments of all persuasions have seen fit to encourage people to buy a home of their own and it makes good sense”, said Ron Silberberg, HIA’s Managing Director.

“High levels of home ownership, by reducing the need for social security support, can provide substantial savings to government budgets, which will become even more important with the aging profile of Australia’s population.

“When people decide to take out a loan to purchase their home, they are making a decision to save regularly. Paying off a mortgage does not mean locking away savings in a vault for life.

“For years, people have been able to release some of the equity in their dwelling to buy other consumer goods, help pay for the education of children, to invest in shares and to fund a business. Portfolio loans and reverse-equity mortgages have made housing equity much more liquid and mobile.

“Extending the capital gains tax to the family home would mean allowing home owners to claim a host of tax deductions for dwelling expenses, including mortgage interest, property rates and charges, repairs and maintenance and home insurance.

“Soon there would be howls of protest from the very people who denounce negative gearing of rental investment property that home owners were negatively gearing owner-occupied dwellings. You cannot have your cake and eat it too.

“It is common in the housing policy debate to look at Commonwealth taxation arrangements as the source of house price booms. Unfortunately, too little attention has been paid to the supply-side of the housing market and the plethora of affordability-busting state- and local- government taxes on new housing supply.

“Artificial blockages on new housing supply mean higher established house prices will be needed to coax existing owners to place their houses on the market for sale.

“By reducing regulations and the indirect tax take on new housing supply, policy makers can help to take the heat out of the housing market and established house prices during periods of increased demand for housing,” commented Ron Silberberg.

Source - Housing Industry Association Limited