Backlash for Prime Minister Malcolm Turnbull after promoting negative gearing with couple who bought home for their one-year-old baby
The story of an every-day Australian family purchasing a home for their one-year-old daughter in Sydney’s south was supposed to highlight the benefits of Prime Minister Malcolm Turnbull’s negative gearing policy.
Instead, it caused public outrage.
The PM met with the Penshurst family of Julian and Kim Mignacca on Sunday to show the nation one of the success stories of negative gearing.
Turnbull took the opportunity to slam the opposition’s plans to restrict negative gearing to new properties only and promised that, under the Coalition, no changes would be made to the policy.
The Mignacca family purchased their first investment property in Cronulla 10 years ago, which they sold to buy a house in Penshurst.
The couple also own an apartment in Penshurst, and said their portfolio wouldn’t exist without negative gearing..
“Look, if you couldn't negative gear a property I don't think I would buy another investment property,” Mr Mignacca told The Daily Mail.
“It would purely cost me too much,” he added.
But others aren’t convinced.
During the press conference, Turnbull told reporters that Mr Mignacca had purchased the three-bedroom Penshurst property “in order to buy a place for his little daughter Adison who we just met who is nearly one”.
A huge wave of criticism followed, with people claiming this highlighted the exact problems with negative gearing.
“You can’t see the problem with this?” wrote one angry woman.
“It uses tax dollars to advantage those who are already advantaged while locking out those who just want one house to actually live in themselves. Poor selfish public policy. We deserve better.”
Another woman noted how difficult it is for first homeowners to enter the property market.
“Would much rather see a tax break given to a young couple struggling to buy their FIRST HOME, while renting a home owned by a one year old!” she said.
Researchers at the Grattan Institute found changes to negative gearing and capital gains tax would save $5.3 billion a year – findings that Turnbull quickly rejected.
Opposition Leader Bill Shorten said the report “pulled the rug” from under the government’s attack on Labor’s policy changes.
"The reason why it's pulled the rug under Turnbull's nonsense scare campaign is that in Australia we need to keep alive the dream that buyers of their first home can compete on a level playing field with property speculators," Mr Shorten said on Tuesday.
CEO of Grattan Institute John Daley said Australia's version of negative gearing, along with the 50 per cent capital gains tax discount, costs the public purse $11 billion a year.
He believes the proposed changes will improve housing affordability slightly, with house prices expected to ease by no more than two per cent.
As negative gearing stands, it substantially increases borrowing by investors - which is one of the reasons the Reserve Bank doesn't like it very much - and it results in less owner-occupied housing and more investor housing.
"It is unclear why we would want to encourage that," Mr Daley told AAP.
He believes Labor's proposal to limit negative gearing to new property while allowing people already holding negatively geared properties to continue - so-called grandfathering - will just add to distortions and complexities in the tax system.
But he is pleased that one side of politics is prepared to talk about changing negative gearing.
"I am pleasantly surprised that a political party in Australia has had the courage to have a go at negative gearing," he said.
Turnbull has ruled out any changes to negative gearing as part of the government's tax reform package to be released with the May 3 budget.
PM promises to outline tax reforms before budget
News break – April 26
