Another major focus of the Labor tax policy is to improve housing affordability. Two policy measures it claims will assist in this objective is to remove negative gearing on investments and alter the CGT discount.
Like most Labor tax policies, these will only apply to investments purchased after the change is introduced, so it will not impact those who currently have share and property portfolios. However it will impact those who do invest in such investments after the change is introduced (expected to be 1 July 2019).
Negative gearing occurs where an investment’s deductible expenses exceed the income and produce a loss. This loss is then applied against the taxpayers other income (i.e. their salary/wage) to reduce their income and generate a tax refund. Under Labor’s policy, investment losses could only be used to offset current or future year investment gains and not other income.
Labor also proposes to reduce the general CGT discount available to individuals and trusts on the sale of a CGT asset held for more than 12 months from 50% to 25%. However super funds have been excluded from the change and the change does not impact the small business CGT concessions.
Again it will be interesting to see whether these measures have any impact on the housing market or whether it just results in ordinary taxpayers being forced to pay higher taxes.