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Negative gearing: changes in tax policy on are on the table -

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LEIGH SALES, PRESENTER: In an unusual development in Australian politics, a federal opposition has now released more economic policies going into an election season than a government.

The Opposition Leader Bill Shorten announced over the weekend a policy to wind back many of the tax concessions related to negative gearing. It joins some of Labor's other plans on superannuation and multinational tax avoidance.

Now, as Sabra Lane reports, everyone's waiting for the Prime Minister to flesh out some of his plans.

SABRA LANE, REPORTER: The Prime Minister came face to face with Courage this morning - Courage, the wedge-tail eagle mascot.

MALCOLM TURNBULL, PRIME MINISTER: Mmmm.

EWEN JONES, LIBERAL MP: The Prime Minister has this effect on chicks all the time.

MALCOLM TURNBULL: (Laughs)

SABRA LANE: He was on a tour of Lavarack Barracks in Townsville with all sorts of fire-power on display. Whip and local MP Ewen Jones was keen to get his hands on a grenade. Mr Turnbull was steering clear.

MALCOLM TURNBULL: I'm a great believer that we should leave the handling of the weapons to the professionals. I know some politicians like to fire guns, but I think it's better - I think it's better that your trained personal do it.

SABRA LANE: Until now, MPs have had a hands-off approach to negative gearing and capital gains tax discounts on investment property. Changing it's been regarded as electoral dynamite, but it appears it'll become a major battleground at this election.

BILL SHORTEN, OPPOSITION LEADER: Under a Shorten Labor government, from July 2017, negative gearing will only be available on newly-constructed homes.

(Applause from audience)

MALCOLM TURNBULL: So yes, we are looking at all of these tax issues and negative gearing's one of them.

JOHN DALEY, GRATTAN INSTITUTE: It looks as though a hind quarter of this sacred cow may well get roasted and not before time. Negative gearing is a policy that ultimately reduces home ownership, costs the Commonwealth a lot of money in terms of foregone tax revenue and is very unfair in terms of who benefits and who doesn't. So, it was high time that it went and we're delighted to see that we may well get some action on this front.

SABRA LANE: Labor's proposing new rules from July next year, but they won't be applied retrospectively. From then, only new properties will be negatively geared and the capital gains tax discount will be halved to 25 per cent. It'll save $565 million over the four years of the budget cycle and $32 billion over 10 years.

SABRA LANE: In criticising Labor's plan, the Prime Minister's given the impression that whatever his government comes up with, it'll save the budget even more money.

MALCOLM TURNBULL: The policy as described has been criticised and I think fairly as going - as likely to really distort the housing investment market. So it is a - it's not a well-designed policy, if I can put it that way. And it doesn't have the - it doesn't provide any budgetary relief, at least anytime soon.

SABRA LANE: The last treasurer was a big fan of cutting back negative gearing. He said so on the day he left Parliament.

JOE HOCKEY, THEN OUTGOING MP (October 21, 2015): In that framework, negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property.

SABRA LANE: The Grattan Institute's John Daley has long argued the need to change the policy.

JOHN DALEY: In terms of the impact on households, it's true that there are lots of cleaners and teachers who negatively gear property, but there are as a proportion of the total, a lot more doctors who negatively gear, and when doctors do negatively gear, they make a lot more money out of it.

SABRA LANE: The Coalition's come a long way in short time; from no change in this policy under Tony Abbott to promising something. The Opposition deserves some credit for that. Australia wouldn't be having this debate if Labor hadn't flagged major change. That's given the Government some political cover to tackle an issue previously regarded as untouchable. There are more than a million landlords in Australia and many of them will be sweating on more details from the Treasurer. They might come midweek when he's due to address the National Press Club.

SABRA LANE: The new Trade Minister Steve Ciobo's electorate of Moncrieff includes the Gold Coast, an area bursting with investment properties.

STEVE CIOBO, Incoming Trade Minister: They've put forward a proposal - I think it's crazy, but they've put forward a proposal. We'll put forward a proposal in terms of our tax mix.

SABRA LANE: You say the idea is crazy. The last treasurer, Joe Hockey, advocated tailoring negative gearing back and skewering it towards new investment on the day that he left this place.

STEVE CIOBO: Well we've not had that policy that we've taken forward and, you know, look, fundamentally, I think the Australian people, come the next election, will be in a position to decide about what they think is appropriate in terms of the policy mix. Labor's said $600 million revenue will thoroughly distort the market and will result, I think, in people that are reselling homes and apartments having their market decimated and the Coalition will have a proposal that will see us put forward changes to Australia's tax mix with a view to also reducing personal income taxes.

SABRA LANE: Steve Ciobo is a big winner of the cabinet reshuffle, taking over from Andrew Robb, who's retiring at the next election, but will he'll stay on as a special envoy until then. Mr Robb's set a high benchmark, finalising deals with Japan, Korea, China and the Trans-Pacific Partnership.

STEVE CIOBO: (Laughs) What's - what's left? Well look, this is the challenge of following Andrew Robb. I mean, I think on any fair measure Andrew Robb is probably regarding as being if not the best, one of the best Trade ministers Australia's ever had. What sort of a legacy that leaves for me, I guess time will tell.

SABRA LANE: With the electoral clock ticking down, Mr Ciobo and the new-look ministry will have no room for mistakes and missteps. And given the constrained economic times and the budget position, both sides are being forced to show more policy courage in finding the money to pay for their promises.

LEIGH SALES: Sabra Lane reporting.