As most property investors will be aware the Opposition has announced policies which would result in a number of significant changes to tax arrangements applicable to property investment if they are elected to Government.
- A halving of the capital gains tax discount from 50% to 25% for property acquired after 31 December 2019
- The limitation of negative gearing to new build property – but only for properties acquired after 31 December 2019
What should investors do in contemplating the prospect of these changes?
Our strong advice is don’t panic!
First, we recommend waiting for the election. The polls are tightening but the outcome of the election is still far from certain, although a change of Government currently appears more likely.
Secondly, even if elected there is no certainty that a Labor government will be able to get Senate support for legislation to implement the proposed policies at all or at least without amendment. Indeed most of the minor parties likely to have the balance of power in the Senate have indicated this week that they are likely to oppose both changes. So even if the Government does change, the tax laws may not.
Thirdly, even if there is a change of Government and the legislation passes the Senate, there will be at least 7 months to make any decisions that might be made as a result – as the earliest the new tax regime will kick in is Jan 1, 2020.
Either way, the ending of uncertainty on these issues will be a positive for everyone in terms of getting a clear set of rules to play by. Once we know who forms Government, what is happening in the Senate and whether there is any change in policy, we will give you a clear outline of the impacts any changes may have on the market in general, on decisions to invest or to sell and how people may want to restructure their portfolio’s or their financing in the next 7 months if required.