Federal Election 2016 : Negative gearing Treasurer Scott Morrison says RBA memo 'not official', outdated
Federal Treasurer Scott Morrison has dismissed a Reserve Bank memo which suggested winding back negative gearing could be a "good thing".
An RBA internal briefing note, obtained by the ABC under freedom of information laws, said: "Any change which discourages negative gearing may be good from a FS [financial stability] perspective."
But Mr Morrison said the note was not official advice and was prepared in 2014.
"This was a note — not official RBA advice — that was prepared in 2014," Mr Morrison said.
"It is not a commentary on the Labor Party's policy."
"It was input and the thinking at the time before APRA [Australian Prudential Regulatory Authority] introduced measures that the RBA more recently, and over the last six months, acknowledge have been effective in cooling elements of the housing market."
The document was produced sometime between March 2014 and April this year.
Documents provided by the RBA do not say whether it was written before or after Labor's policies were released in mid-February this year.
Finance Minister Mathias Cormann said the memo was not representative of official RBA policy.
"This is an old document, it is an internal document, it is a document that outlines historical perspectives," he said.
"It is not an official position of the RBA and it shouldn't be misrepresented that way."
But Shadow Assistant Treasurer Andrew Leigh said the note "very clearly" endorsed winding back negative gearing.
"The released memo very clearly says changes which discourage negative gearing may be a good thing from a financial stability perspective," Mr Leigh said.
"It makes it absolutely clear: Financial stability is at risk if we don't do something about the capital gains tax discount and negative gearing."
Negative gearing allows property investors who make a loss to reduce their tax liabilities on other income.
Federal Labor has proposed restricting the tax deduction to new investment properties from July 2017.
It has also promised to halve the capital gains tax (CGT) discount, saying the two policies would boost the budget by $32.1 billion over a decade.
The capital gains tax discount gives tax-free status to half the profit made from selling an investment property.
The memo said the interaction of negative gearing with the CGT discount "may encourage chasing of capital gains … as it can be purchased using higher leverage than shares for example".
It also said there was a "potential increase in rents" from making negative gearing less attractive.
The document hypothesised there could be a large-scale sale of negatively geared properties, if changes were not grandfathered.
Labor says its plan would protect existing investors.
The RBA expressed its official position on negative gearing and the CGT discount to the House of Representatives Economics Committee last year, acknowledging there should be a review.
"The bank believes there is a case for reviewing negative gearing, but not in isolation. Its interaction with other aspects of the tax system should be taken into account," the RBA said in its submission.
Source: ABC News