The Greens have released Parliamentary Budget Office (PBO) modelling that shows the Government could save $3 billion in four years by abolishing negative gearing.

The tax break allows investors to claim expenses for rental properties and reduce tax paid on any other income.

The Government has already ruled out winding it back, but Labor has left the door open to possible changes.

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The PBO estimated the proposal would increase Government revenue by $42.5 billion over the period to 2024-25.

Greens senator Scott Ludlam said scrapping the measure was “long overdue”.

“I don’t think it’s fair that low and middle income taxpayers should be subsidising property investors and that’s really at the heart of why we’re making this proposal,” he said.

Senator Ludlam said in addition to improving the budget bottom line, scrapping negative gearing would also improve housing affordability.

“Having such concessionary tax treatment of housing has meant that effectively we are subsidising housing investors to bid up the price of property,” he said.

“That has priced first-home buyers completely out of the market, particularly young people, and that’s what has been contributing to pushing up rent.

“So this is one thing we could do to help a lot of people at the same time.”

He said the change would only affect new investments.

“Those who have already got their properties set up that way would be able to keep it,” Senator Ludlam said.

“But we don’t think it should continue to into the future.”

Initiative could combat housing affordability: Ludlam

Senator Ludlam said the $3 billion raised could be spent on combating housing affordability and housing the homeless.

“I think it’s one of those things we could do, spend money on housing supply and cool the housing supply and actually get people off the social housing waiting list,” he said.

“Because quite clearly, negative gearing has failed if it was ever about housing supply.

“Most of the tax concessions from negative gearing and capital gains tax exemptions, as you’d expect, are going towards people who can afford property investment in the first place and that’s overwhelmingly people in upper income brackets.”

He said he believed it was possible to change the Government’s mind on whether to scrap the tax break.

“Labor has said some quite encouraging things in the last couple of months and the Government is so incoherent, ruling things in and out and changing their minds, that I think anything is possible,” he said.

Labor’s Environment spokesman Mark Butler was wary of the Greens policy and said it is not just big property investors who benefit from negative gearing.

“Mum and dad investors who might just own one house, maybe two houses,” he said.

No Sydney housing bubble: Frydenberg

Meanwhile, Assistant Treasurer Josh Frydenberg has told the ABC’s Insiders program he does not think there is a housing bubble in Sydney.

It puts him at odds with the Treasury secretary John Fraser who has declared the housing markets in Sydney and parts of Melbourne are “unequivocally” in a price bubble.

Mr Frydenberg said the Government needs to watch the market but has rejected Mr Fraser’s characterisation.

“I don’t think there’s a housing bubble, I think housing prices have gone up but I mean it went up higher in the early 2000s,” he said.

“We need to watch the housing price growth and APRA and the RBA, which are the regulators, are doing that but at the same time we have seen strong housing prices before.”

-ABC