Treasurer defends tax changes impacting young investors and rentvestors
Treasurer Jim Chalmers has defended the impact of the government's proposed tax changes on young people who use the share market and rentvesting to save for a deposit.
Tuesday's federal budget laid out a plan to reduce the Capital Gains Tax (CGT) discount and scrap negative gearing for all but new homes, with a caveat to grandfather existing assets.
Critics argue targeting CGT, which applies to all investments including new shares and crypto, limits one of the only wealth-growth avenues available for young people.
But Mr Chalmers said under the existing CGT settings, shares had been "under compensated" for two decades, arguing it was better for people to invest based on economic outcomes rather than tax outcomes.
"We're taking one of the big distortions out of the market," he told Insiders.
The Coalition had promised to reverse Labor's tax reforms if elected.
Shadow Treasurer Tim Wilson said the changes were "knee-capping" self starters.
"Young Australians are buying shares, ETFs and crypto at record rates," he said.
"The idea that the treasurer can dictate to Australians their pathway, their dreams, their success, is not just arrogant, it's ignorant."
Rentvesting still available on new builds
Mr Chalmers said young people would still have the opportunity to utilise negative gearing to rentvest, if they were to purchase a newly built home.
Rentvesting is a strategy where people rent a home that suits their lifestyle while purchasing a property in a more affordable area to enter the property market.
"They can continue to do that for the home that they already own, and they continue to do that in the future for new builds, which would be a very positive contribution that they would be making to our communities," he said.
Some experts have warned rentvestors could be disadvantaged if they purchase new homes, because the value of the house would depreciate at a faster rate than the value of the land increases.
Mr Chalmers said rentvestors represented a small proportion of people under 35.
"In terms of numbers, its much less than 5 per cent of people under 35 have got rental income, but that includes owner-occupiers and includes people who are positively and negatively geared," he said.
"Well under 5 per cent of people under 35 are doing this."
Prime Minister Anthony Albanese said by rentvesting in new builds, young people would play their part in boosting supply.
"The difference is that not only will they be building an asset and wealth for themselves, they will be building an asset and wealth for the nation at the same time, boosting supply," he said.
"That is a common-sense change."
