Labor's negative gearing changes explained

By Kay Rivera | 09 Nov 2018

The much-discussed negative gearing modifications proposed by the Australian Labor Party (ALP) were recently clarified, thanks to an industry professional from the tax community.

Professor Robert Deutsch, Senior Tax Counsel with The Tax Institute, noted that proposed changes to negative gearing would apply across the board to all investments – there have been misconceptions that Labor’s negative gearing restrictions might only apply to property investment.

“However, the overall impact of Labor’s negative gearing proposals is not likely to be nearly as draconian as some sectors seem to be suggesting. The good news is that the proposed restrictions to negative gearing would apply on a global basis to every taxpayer”, said Professor Deutsch.

This means that individual taxpayers will have to look at the totality of their investments

“For example, if the total of the interest and deductions related to investments exceed the investment income, the excess will not be able to be used for offset against other non-investment income. This excess will need to be carried forward for offset against future investment income or capital gains. Importantly, you will not have to look at each individual investment, or at any particular asset class – that would have been a very onerous and cumbersome exercise,” explained Professor Deutsch.

 “It would continue to allow people to hold for example, 4, 5, or 6 properties with some positively geared and some negatively geared. Provided the overall positives exceed the overall negatives, there will be no problem.”

More importantly, Professor Deutsch noted that this is good news for investors, as it allows Australia to come closer to how investment practices are held in many other countries, such as the United Kingdom.

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