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The Prime Minister has confirmed that the Albanese Government has secured support from the Greens for its housing tax reform legislation, after making a range of promises to the party - including a promise to support an amendment (set to be moved by the Greens) to ban future limited recourse borrowing arrangements (LRBAs) for residential property by superannuation funds.
As such, the Greens have today (23 June) confirmed they will support passage of the first tranche of tax reform legislation, which includes the negative gearing and capital gains tax reforms - as well as tax cuts for 13 million workers.
Under the arrangement, the Greens have said they will vote for the legislation for the following support from government:
LRBA ban for resi property
The Labor party has agreed to close self-managed superannuation fund’s exemption from the prohibition on being able to borrow to fund investments.
Superannuation funds are generally prohibited from borrowing to purchase assets because it increases financial system risk.
However in 2011, SMSFs were given an exemption, enabling limited recourse borrowing arrangements (LRBA) to purchase property.
This change will be prospective, protect contracts signed before the date of commencement and provide time to finalise arrangements currently in train – by taking effect 45 days after royal assent.
Prime Minister Albanese said: “These arrangements constitute less than 1 per cent of total residential property borrowing and less than half a per cent of new residential borrowing each year.
“These changes don’t in any way change the tax arrangements for superannuation, don’t impact any existing SMSF borrowing arrangements and provide time to finalise arrangements that are in train.”
“Labor built superannuation and we’ll always look to make it stronger and fairer, and agreeing to these changes will reduce the risks to retirement savings while also securing passage of these important reforms to make the tax system fairer,” he said.
Treasurer Jim Chalmers said the changes to SMSF borrowing were a major change in their own right but reflected the "realities of the Senate where nobody has the numbers on their own".
"That's why we are willing to support these changes today," he said.
Remove Treasurer's power to intervene
The government has also agreed to remove the Treasurer’s ability to add any additional classes of assets that can become eligible for the 50 per cent CGT discount and “rein in his power to prescribe any type of property investment that can be eligible for deducting losses against salary and wage income”.
“This prevents a Minister undoing these changes at the stroke of a pen by extending the discount to other assets,” a Greens spokesperson said.
Speaking of the decision, Prime Minister Anthony Albanese said: “The three right-wing parties voted against these tax cuts and in favour of big tax breaks for property investors in the House, and now they’re planning to vote the same way in the Senate, which will mean voting against tax concessions for small businesses as well.”
He said the move meant the government was “another step closer to delivering its tax reforms for workers, home buyers, and businesses”.
“These reforms will make it easier for Australians to buy their first home, cut taxes for over 13 million workers, and better align the tax treatment of labour and asset income.”
He said: “It is now a question for the rest of the Parliament whether they will get on board with tax cuts for workers and a fairer tax system for first home buyers.”
Prime Minister Albanese said that government amendments to the legislation will mean all 2.7 million active small businesses and 98 per cent of all active businesses will be eligible for "generous" CGT concessions, and will also support amendments to the NDIS legislation to clarify the implementation of the reforms.
Australian Greens Leader Senator Larissa Waters said: “This was a once-in-a-generation moment to help young Australians - but by grandfathering in wealthy property investor tax perks Labor has once again chosen to put the 1 per cent over the millions of people trying to buy their first home.
“Backing this bill puts an end date on these tax breaks - but Labor’s low ambition means that inequality and the housing crisis will be worse for longer. This enduring housing crisis will now be squarely of Labor’s design.
“We are glad that the government has listened to some of the concerns raised through the inquiry process by the Greens and experts, but Labor has again ignored young people and renters,” she said.
“Ending rather than grandfathering these tax breaks today would have helped renters get into a home of their own - but Labor is telling first homebuyers to wait because wealthy property investors haven’t made enough money off the housing crisis.
“The Greens will continue fighting for the third of this country who rent, while Labor, Liberal and One Nation keep trying to give more perks to ultra-wealthy property investors.”
Senator Katy Gallagher said Labor would move a motion this afternoon that facilitates the passage of a range of legislation, including the tax reform bills, and suggested those bills would be finalised by the end of this sitting week.
"We appreciate the negotiations we've had right across the chamber. As you all know, nothing gets done in the Senate without deep negotiations," she said.
"We appreciate the engagement we've had with all, but in particular with the Greens for securing this important motion that will pass the Senate after 12 o'clock today."
More to come.
[Related: Senate urged to soften negative gearing and CGT reforms]
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