Labor's Policy to Grandfather NG/CGT Changes

If Labor wins the next election, they have proposed changes to negative gearing and capital gains tax:

General consensus is that this will have a negative impact on property prices, but I think there are a number of reasons it might not have the impact expected. I haven't seen modelling that takes into account changes to investor behaviour.

If Labor is looking likely to win or shortly after they do, there may be a surge to buy property before the cutoff date. Demand is likely to fall immediately following the change, however there is no guarantee the fallout is larger than price gains caused by the immediate rush to buy.

In addition (and this is something I have not seen discussed anywhere), if an investor has a number of properties purchased before the cutoff, they may be in a position to keep borrowing with a high LVR against these properties to balance and maximise the negative gearing benefits on those properties purchased before the change with larger deposits for those on which they can't.

Are there any other 'loopholes' or behaviour changes which could impact the outcome?

 

This has been discussed ad nauseum and many loopholes identified. I can't remember them all but it's a very interesting question.

It also depends on the final implementation and if the negative gearing against "other investment income" is retained. If so then anyone with investment income will effectively be paid to negatively gear a property.

Another option (for those who can afford it) is to wear the annual loss but deduct those cumulative losses from the capital gain at sale. It's a nice deal for those who can afford it.

Finally, investments can be made using other structures such as companies. It is more likely that higher worth individuals would be aware of and have access to advisors who could assist with this.

It seems this policy will expressly block lower to mid income earners from accessing negative gearing where higher income earners will not be affected (depending on how they have structured their portfolios).

 

"A Labor government would confine negative gearing to new housing from July 2017", CGT discount to 25% same date or have they flip flopped on this as well

according to this the cutoff day has already passed and if this is true I hope everyone who bought after July 17 bought with this in mind. Don't think many people around Melbourne would have much gain if bought after 7/17 anyway

 

I don’t think the ALP’s changes to NG and CGT will the vote winning strategy in 2019 as it would have been in 2017.

In Sydney and Melbourne especially, the number of properties listed for sale is dropping, auction clearance rates are falling, foreign investors have ****** off, property prices are being pushed down, ...

Who know what the state of the nation will be in another 6 months time? I bet the majority of voters will have second thoughts about these great ALP policies, especially if further **** hits the fan !!!

 

I found this Switzer article interesting:
When Labor flicks negative gearing, will house prices fall?

It says that applying NG to new builds wont be appealing to investors, as they cant onsell to other investors as the place will be second hand by then. Pretty common sense analysis when you think about it.

 

Some really interesting data & anecdotes in this piece.

I think there is a good argument to be made for retaining the 50% CGT discount on new build per the discussion points in this article:

ALP and Negative Gearing: Why risk it?

Particularly if investor involvement in new builds is as common as suggested in Switzer's anecdotes (which surprised me).

I gave the proposed changes another look last week (writing up the below article) and I am not sure that much will change with the loopholes Labor have left in the policy (e.g. allowing negative gearing for new investments in established property against investment income):

Impact of Labor’s Negative Gearing Policy on Home Prices

 

How long can we expect it will take to implement this new policy once elected?

 

If it hits Parliament the Senate has more chance of approving things before 30 June when they get rotated out for all the dip ***** like Palmer and his buddies. They will vote no to everything until they extract concessions.

Fraser Anning could become the next High Commisioner in Port Moresby (or New York) in return for votes. Derryn Hinch takes on the High Commission in London and so on..........

 

It has to pass the senate first. It's a big assumption that will happen.

If it passes the senate the projected start date is 1st Jan 2020 at this stage