It isnt just property that cant be negatively geared, its EVERYTHING !!

https://www.taxinstitute.com.au/tim...rictions-good-news-and-bad-news-for-investors

Professor Robert Deutsch, Senior Tax Counsel with The Tax Institute has been able to confirm with the Australian Labor Party (ALP) that proposed changes to negative gearing would apply across the board to all investments. Previously it was thought that Labor’s negative gearing restrictions might only apply to property investment.

 

What!!!

Even businesses, including startups?

 

My understanding:

It can’t be negatively geared but losses can be carried forward indefinitely and offset against any other investment income.

If anything I see it as a very positive development.

 

“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” adds Professor Deutsch.

 

You would be able to continue negatively gearing new investment in established homes (or shares, etc), but only against investment income (not salary / wages).

 

Carrying losses over seems fine. Just means more years of losses before properties swing into positive cashflow territory. less High taxable income earners looking to drop their tax buying property then

 

what does it even mean?
so If I have 3 IP PG by 100$ and other two NG by 20k is that ok?

or does it mean one needs to be net positive,
so no net NG benefit from current years other income at all?

 

removal of NG without grandfathering means,
current cash flow squeeze resulting in some forced sales.

Investors loan serviceability further squeezed.

Interesting next 2/3 years ahead.
all negatives are aligning at the same time for a perfect storm.

 

I think the quote answers this. Any loss will not be available to offset other income.

 

Isn't it remaining for new builds?

 

The ALP havent released draft laws. Nobody knows what the final form may take.

Good example was the last budget. Govt announces that the superannuation work test is gone for older people. Draft laws came out a few weeks back and the proposed law is NOTHING like what was announced as black & white. The work test may be removed for only some people who have little in super. Otherwise the work test definitely remains for those with more than $300K of super.

I can see some people with offsets being able to game the system when these laws come. Or use salary sacrifice strategies in some cases. Or some trust strategies too. Remember Julia Gillard - Famous for her complete about face on carbon tax immediately post election.

 

Where did you find the information that grandfathering had been removed from the draft policy?

 

from the article, though it doesn't mentions it explicitly but I inferred they are talking about all investors no exception.

here's the quote from article....

"the proposed restrictions to negative gearing would apply on a global basis to every taxpayer”, says Professor Deutsch.

“This means that Individual taxpayers would need 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. "


My inference,
Reducing you current taxable income by the amount of net loss from IPs will be no longer allowed, Irrespective of investor type(no Grandfathering or even uncle-ing) and asset class, if this policy comes to frustration that is.

 

They may be talking about all investors and future investments but there is no reference to grandfathering.

 

The policy on the ALP website continues to mention grandfathering but dont assume much in that and read on below. However I would assume it wont be quite that simple and can think of a range of factors that could taint a grandfathered loss. eg refinance borrowings, increase a borrowing, stop being a rental to be a PPOR then later restart rents, add a GF and so on.

And to caution that despite the ALP policy website clearly mentioning neg gearing (ONLY) of property that the proposed changes will be broader. So the break down of facts has started...Read it for yourself and compare to the amended views here :

Positive plan to help housing affordability

Specifically read and interpret this

From a yet-to-be-determined date after the next election losses from new investments in shares and existing properties can still be used to offset investment income tax liabilities. These losses can also continue to be carried forward to offset the final capital gain on the investment.​

If I read it right its garbage to say grandfathering applies. It says - Forget neg gearing v's ordinary income for shares etc or even existing property after a unannounced date. But all investment losses might be capable of offsetting investment income - Maybe.

Even existing laws unrelated to neg gearing impact this issue. eg non-commercial loss rules. NCLs for investment losses (eg share trading etc) are presently a complex web and generally subject to a taxpayer earning $250k or less AND meeting some other tests. Those laws must be rewritten or developed to reflect these changes too.

 

If this goes through and there's no grandfathering, I reckon it will trigger an investor sell-off in a way that the whole IO expiry/P&I cliff thing never will.

IO expiries affect only a small portion of large scale investors where this affect all - most Mum and Dad investors rely on NG to help with the cashflow of their properties and I reckon this will really stress out a lot of small investors who may not have bought well (or with a plan) to start with.

Thinking specifically of people who bought 'any old thing' in Perth in the last 10 years - by now you'd have hoped things would be getting close to CF neutral or +, but the reality is that for most people they'd be nowhere near, and really unable to afford (or even want to afford) the additional cashflow.

 

I would read that as new investments in existing properties as opposed to new investments in new properties. This would be consistent with allowing grandfathering of existing investments and allowing NG only on new property.

As you say the devil will be in the detail.

 

ALP has to win the election first .

For all of our sakes, et’s hope and pray that they don’t .

 

Agree - I pray that all the time regardless But if there is no grandfathering, it will affect a lot of mums and dad's who would otherwise possibly be Labor voters, so it might be for the best!