impact of negative gearing

What could changes to negative gearing mean for you?

impact of negative gearingOne of the biggest concerns for property investors at the moment is the prospect of changes being made to negative gearing.

The Liberal Party have made a pledge not to change negative gearing or Capital Gains Tax laws.

The Australian Labor Party, however, do have plans to change negative gearing laws if elected.

Under the ALP’s proposed changes:

“Labor will limit negative gearing to new housing from 1 July 2017. All investments made before this date will not be affected by this change and will be fully grandfathered.

This will mean that taxpayers will continue to be able to deduct net rental losses against their wage income, providing the losses come from newly constructed housing.

From 1 July 2017, losses from new investments in shares and existing properties can still be used to offset investment income tax liabilities. These losses can also continue to be carried forward to offset the final capital gain on the investment.”

For existing investors, this will mean you’ll continue to deduct your property expenses as normal.

But any new investments won’t be eligible for negative gearing, unless you invest in brand new housing.

Just how this will impact the broader economy remains to be seen.

It’s expected that it will constrain property prices by limiting demand.

It could also prevent some investors from sinking their hard-earned cash into money pit properties that drain their bank balances, as they’ll no longer be able to leverage their losses on their tax return.

But investors will also undoubtedly take their dollars elsewhere, such as to shares and stockmarkets – and that will limit property supply.

There’s even talk that it could threaten the livelihoods and income of Aussie tradies!

If you’re concerned about how changes to negative gearing could impact you, feel free to contact us for an obligation-free chat, or get in touch with your accountant to discuss your situation in depth.

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