Treasury asks RLA for feedback – Tax Survey

I understand that the Australian government are keen to encourage all Australians to improve the quality of existing housing stock.
Thus everyone who spends money on home improvements can claim the cost of the improvement against their income tax.
No doubt there is more in the details of this but the principle seems sound to me.

The issue of business-level tax reliefs for buy-to-let is always problematic inasmuch as BTL is rarely the main source of income for smaller landlords. The further twist is that few, if any, non-corporate landlords pay national insurance contributions, somewhat undermining the case to be considered businesses in the purest sense.

However, regardless of what the ideal situation might be, the fact of the matter is that the private rental market is dominated by small investors and is unlikely to change significantly in structure going forward. Tampering with the current delicate balance risks removing significant capacity from an already stretched market. This may well increase the supply of properties available for purchase, but won't do much to address the problem that fewer people are in a position to buy at any price thanks to stricter credit rationing.

My experience as a small landlord (8 properties) was that it was only investor buying in 2010 and 2011 that prevented rents rising (in London in particular) even more sharply than they did. The mechanism was imperfect, reallocating existing property from owner occupier at a time of low demand. However, it doesn't take much imagination to see what would have happened if the market's attempt to deliver more rental accommodation had been stymied.

To my mind an important element of a better taxation system would be to distinguish between purchasing properties requiring little or no additional capital investment and those requiring significant refurbishment to make them habitable. Ideally we'd be talking new builds.

In framing such policies there are two significant issues we need to understand. The first is why larger businesses form such a relatively small part of the private rental market. What element of current incentives is it that encourages legions of small landlords, yet makes companies relatively reticent? The student market is one where large companies have transformed the quality of the offering to students and, to a degree, kept private landlords in the sector "honest".

The second issue is the systematic bias against Houses of Multiple Occupation. I'm not an HMO landlord, but it seems to me that if we are collectively not building sufficient new housing stock, making the existing stock work harder is the only rational option. A one-bedroomed flat is a waste of space for most singletons, especially if they are on a tight budget, or solely dependent on benefits.

HMOs appear to be subject to huge institutional prejudice from the very authorities you might imagine would be keenest to increase the supply of cheap, local accommodation.

Most are already licensed and there are more than sufficient existing regulations to ensure the quality of supply if this were made a priority.

If there is a sense in which authorities believe that the amount of tax incentive available to encourage investment in the private rental sector is limited, then it has to be spent wisely on creating good quality new capacity.