Potential Changes to Negative Gearing Looming

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With the Federal election looming in September, both major parties have signalled policy changes to negative gearing.

It goes without saying that changing the access to negative gearing is likely to have an impact on property sales, values and trends.

While each party’s policies fundamentally differ, we must reiterate that they are still in their draft form and subject to change.

Labor

According to the Financial Review, it was reported that should Labor win the election, the following negative gearing-related changes would be implemented:

  • Existing investors will not be affected;
  • After 1 July 2017, only purchasers of newly constructed homes will be able access negative gearing; and
  • Capital gains tax deductions for investors, who hold a property for at least 12 months, will have their deduction halved.

This implies is that all existing homes purchased up until 1 July 2017 will enjoy access to the benefits of negative gearing, however all existing homes purchased after that date, will not.

Liberal/Coalition

The Liberals have publicly rejected Labor’s policy and according to the Financial Review have sought to target high-end property investors, rather than everyday purchasers, by placing a ceiling on the number of properties that can be negatively geared or limiting the annual tax deductions that can be claimed.

Whilst the Coalition’s policy is still being finalised, it is understood that their policy would be targeting the “excesses” of negative gearing.

What does that mean for NSW Property?

Given the uncertainties, well-informed buyers and sellers of property may display nervousness leading into the election period.

If an investor took the view that Labor were likely to win the upcoming election, property prices over the mid-term might come under pressure as investors could potentially lose key entitlements to tax benefits. However, it would not be a surprise to see a rise in property prices leading into mid-2017, as investors seek to cement their access to negative gearing benefits.

Under the Coalition, property prices may be less likely to be impacted due to policy changes targeting higher end investors. According to Roy Morgan Research, if an election was held now – the Coalition would still win. If that were the case, savvy property purchasers might see any nervousness in the market as a buying opportunity.

Whatever the outcome, being well-informed of potential changes in the market will assist you in making the most appropriate property-related decisions.

For all Property queries and Conveyancing matters, please call us at West Legal & Associates on (02) 9191 7319 or at info@westla.com.au.

Remember to always seek financial advice before making decisions. 

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Author

Jonathan became a lawyer in the Supreme Court of New South Wales in 2011 and is also admitted to the High Court of Australia. He has extensive knowledge in real estate, insurance, court disputes, personal injury, and commercial law.

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