This week Position One Property will discuss the proposed changes to negative gearing and capital gains tax.
If Labor win the up and coming election they are proposing to improve housing affordability by reforming negative gearing and capital gains tax arrangements.
Firstly this is only if Labor win the election and is then able to pass this legislation through the Senate; but most importantly it will be limited to properties purchased from 1 January 2020 which means the proposed changes to negative gearing & capital gains tax DO NOT affect those who currently have a property that is negatively geared.
Negative gearing isn’t new and should not be the reason a buyer purchases an investment property. A property that is negatively geared at purchase may become positively geared over time as rents increase.
Another important factor that Position One Property must point out is that the proposed changes to negative gearing and capital gains tax only will affect those who have properties that are negative geared (A rental property is said to be 'negatively geared' where the deductible expenses, including interest on the loan borrowed to finance the property, exceed the income earned from the property).
Any changes to capital gains tax also won’t come into effect until 1 January 2020 and current properties won’t be affected. If you are an investor changes to capital gains tax will only affect you if you are looking to sell your property. Most investors have a 10 to 20 year plan and a lot can happen in that time. We will have changes in Prime Ministers, Governments and changes to tax laws, so what happens tomorrow will more than likely be very different to what affects you in 10 to 20 years time.
So what does this mean for you?
For current investors it means…. Nothing. There will be no changes for you. If anything, rents will increase as fewer investors will come into the market. This is great news for current owners.
If you are looking to invest it means you need to buy before 1 January 2020….. so why not gives us a call.
I hope this clarifies a few issues that our home buyers and investors have been concerned about.
Stay tuned for more articles from Position One Property.