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Democrats continue squeeze

Federal Government attacks on the building industry by reducing negative gearing incentives is looking more likely as the government battles to get its tax proposals past the Democrats.

As well, the government is also proposing to clamp down on subcontractors who earn 80 per cent or more of their income from one entity by treating them as if they were on the pay-as-you-earn system.

This has raised concerns among the country’s peak property and construction bodies.

The Real Estate Institute of WA has warned the government not to use negative gearing as a bartering tool as it would upset the delicate balance between the supply and demand of affordable rental accomodation.

In the housing sector, it is estimated that up to 90 per cent of work done is carried out by contractors.

In WA, some 25,000 building contractors will be affected.

Master Builders Association director Michael McLean said the effect of the proposal could increase house prices by between 20 and 25 per cent, as almost 50 per cent of the cost of a house stems from the labour component.

“This proposal poses the biggest threat to the affordability and efficiency of the building industry seen for years,” Mr McLean said.

“The proposal attacks legitimate small businesses who are the backbone of a world-class building industry,” he said.

“It shows a complete lack of concern and understanding of how the building industry opertates.

“The building industry is already under siege. The last thing it needs at the moment is the burden of a complex 80 per cent rule hanging over its head.”

Mr McLean said that unless the federal government urgently rethinks its policy there would be a huge back-lash from builders and subcontractors.

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