Labor’s proposed property changes: why investors shouldn’t wait to buy

Over the last few months it’s been difficult to ignore articles discussing Labor’s controversial plans to scale back negative gearing for investors who buy existing property and halving the capital gains tax (CGT) discount.

What’s happening?

In short, if elected Labor plan to cut back the CGT discount from 50% to 25% for newly-purchased property assets held for more than one year, meaning for those assets three quarters of each gain will be taxed instead of one half.

Changes to negative gearing would also restrict tax deductions for mortgage payments to newly built properties.

Only existing houses, flats and commercial premises would be excluded from the scheme.

When will it happen?

Even if the polls are half right, Bill Shorten will be Australia’s 31st prime minister.

With the federal election likely to be done and dusted come the end of May, it is looking very unlikely the Morrison government will recover from their horror 2018 paving the way for Shorten’s Labor to take charge.

Once elected, the ALP will likely try to fast track their changes through parliament. If successful, they could be in effect as soon as July 2019.

How will the changes impact you?

Let’s look at how these changes might impact the average investor pre vs post implementation.

Now is the time to act

The reality is these investor benefits will soon be a thing of the past as the ALP are keen to level the playing field for first home buyers.

However, as the proposal includes a grandfathering provision, those who act quickly can still get ahead of those who wait around.

Savvy investors know to run toward the storm when the headlines spell doom and gloom. A correction in the market is to be expected and should not discourage those looking to get started.

Pockets of Melbourne and Brisbane (even Sydney) are currently experiencing some fantastic results.

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Disclaimer: The information contained herein is general in nature and does not take into account individual situations, needs or goals. It should not be relied upon and persons should satisfy themselves through independent means that any decisions based on this material are appropriate. We recommend that you consult with your adviser who will be able to make a recommendation based on your specific circumstances.