Malcolm Turnbull drops ‘unjustified’ GST increase



The possibility the Federal Government will cut tax breaks for property investors in the May budget is creating nervousness on Malcolm Turnbull’s backbench.

ACT Liberal senator Zed Seselja said “there would be significant concern” among his backbench colleagues if Mr Turnbull changed negative gearing rules.

“We should tread very cautiously in the area of negative gearing,” Senator Seselja said.

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“If we have a policy that starts to tinker with negative gearing, the potential is, even if it’s a very sensible policy, even if it’s only relatively minor changes, then that will affect confidence as well if both parties are taking that forward.”

West Australian Liberal backbencher Ian Goodenough said business people in his electorate — “people who work, save and invest” — raised concerns with him over the weekend about the impact negative gearing changes would have on confidence.


Earlier in the year, the Government said all options were on the table, and had not ruled out lifting the rate of the GST to 15 per cent. Photo: Getty

South-western Sydney Liberal MP Craig Kelly said he was worried changes to negative gearing would push up rental prices and make it even harder for people to save to buy a house.

“We need to remember sometimes when we play with these taxes they have a lot of unintended consequences,” Mr Kelly said.

“Rather than tinkering at the edges and trying to tinker with taxation policy or something here and there, the simple fact is there is just not enough supply.”

Townsville-based Federal Liberal MP Ewen Jones said negative gearing was a big issue in his electorate.

“We have a 40 per cent rental market here,” he said.

Mr Jones said he would support changes to curb the excessive use of negative gearing, but wanted it based on sound modelling.

“If we can come down with a sensible limit on a dollar amount or a number of properties you can have, that benefit the community, that’s where you’ve got to end up,” he said.

Victorian Liberal MP Michael Sukkar also said it was important to consider the issue carefully.

“The Prime Minister is doing just that,” he said.

“We cannot afford to undermine the property market in this country.”

Shorten criticised for flagging gearing reform

On Saturday, Opposition Leader Bill Shorten proposed changing the law so that from July 2017 only new properties would be able to be negatively geared.

Mr Turnbull attacked Mr Shorten’s plan as badly designed, but said the Coalition was also considering changes to negative gearing rules.

Some in the Coalition believe attacking Labor’s policy would be a vote winner, and therefore the Government should leave negative gearing alone.

Welfare advocates have called for negative gearing to be scrapped altogether.

Australian Council of Social Services chief executive Cassandra Goldie said negative gearing did not create enough affordable housing stock and should be dumped.

“What we want is to withdraw negative gearing generally across the board into the future, but we provide a tax incentive specifically targeted to construction of new properties,” she said.

Turnbull rules out GST growth

Mr Turnbull has ruled out increasing the goods and services tax (GST).

He had previously refused to rule out the prospect of an increase, which has been debated since late last year as part of overall tax reform.

Federal Government ministers told the ABC last week that the Coalition had abandoned the idea, but today brought the first confirmation from the Prime Minister.

Mr Turnbull said “the government will not be taking a proposal to increase the GST to the election”.

He said it had been ruled out as the growth dividend would be “somewhere between nil and very small”.

“We looked very carefully at several proposals to increase the GST,” he said.

“After you take into account all of the compensation that you would need to ensure the change was equitable, it simply is not justified in economic terms.”

Treasury had previously modelled eight options for tax reform, three of which included increases to the controversial tax.

The Federal Opposition has been campaigning hard against any potential increase, with Opposition Leader Bill Shorten calling on the Prime Minister to rule out the option earlier Tuesday morning.


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