The Labor Party seems to have rattled the Government with the release of its policy on taxation of property and it seems to be the first time under Malcolm Turnbull the Government seem a little uncomfortable…
Proposed policy:
- Negative gearing will be allowed only on newly built properties from July 2017 and current investments will be grandfathered
- A reduction in the general CGT discount from 50 to 25% on investment properties purchased after 1 July 2017.
This is the Labor Party policy, which has received some favourable independent commentary, and at the very least is genuine taxation reform. The USA, UK and NZ have tax systems similar to the above so this is not revolutionary!
Whenever this subject comes up we hear that property supply will be affected though within this discussion the massive amount of properties sitting completely empty and empty bed rooms in properties do not get much attention. A study of Melbourne properties water usage in 2015 determined that at least 5% were vacant and there are statistics on the 100,000’s of houses with bedrooms empty. We have all these empty places and bedrooms within places yet we have demand forces in the market pushing property process higher and higher due to the lack of supply…. this is very much a by products of a wealthy society. If we are all so worried about our returns after tax on property why are we so inefficient in using the properties… If I own and I am paying for a resource/asset I want to use it fully and get the best return out of it. I would rent out the empty property, rent out the room, sell the big property and get one that fits my circumstances. Is it the case property owners in Australia are doing so well they can give up income and run inefficient investments? Will tax changes make them more efficient – anyway there seems to be a bit of fat in property investment for some…
Uber has disrupted transport and AIRBNB holiday accommodation… can it happen in property? There is a lot more for people to gain than a convenient and $5 taxi saving.
At least we are talking about some genuine reform of the tax system, which is welcome news!