Labour negative gearing changes

Discussion in 'Investment Strategy' started by Aussie1980, 8th Apr, 2019.

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  1. Aussie1980

    Aussie1980 Well-Known Member

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    If I own a ppor do I have to convert into investment property before 01 jan 2020 for it to be grandfathered or can I do it anytime in future and still get investment property benefit. My plan is to convert existing poor to investment but wondering whether timing will affected by the changes
     
  2. Propertunity

    Propertunity Well-Known Member

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    As far as I'm aware the election hasn't been held yet, let alone won by the Labor party with a majority to vote in the proposed changes :)
     
  3. Simon Hampel

    Simon Hampel Founder Staff Member

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    Yup:
    1. if Labor wins election, and then:
    2. if Labor gets changes voted through lower house, and then:
    3. if Labor gets changes voted through upper house,
    4. then look at the details of the legislation and work out what you need to do
    Things may change before we get to step 4 - especially if Labor do not hold a majority in both houses.
     
  4. bunkai

    bunkai Well-Known Member

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    At a guess, any only a guess, you have already taken out the loan so it should be fine. Are you sure your are negatively geared?
     
  5. Simon Hampel

    Simon Hampel Founder Staff Member

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    It is likely to be linked to the purchase (contract) date rather than loan dates - but you'd need to wait and see the final legislation that gets passed to understand the exact situation - it would be dangerous to assume anything at this point.
     
  6. New Town

    New Town Well-Known Member

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    Im in the same boat as I'm sure will be a large number of people. I'm thinking you will need to have a tenant paying rent by 1 Jan 2020 to establish the current PPR as a rental. If I can't shift my family out by then I'm thinking a loophole will be having a border in the house paying rent by that date.
     
    Last edited: 8th Apr, 2019
  7. Zoolander

    Zoolander Well-Known Member

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    Property agents would have a boom pocketing all the reletting fees from owner occupiers switching to rentals before 2020. Then terminate the 3 month lease and move back in.

    Hopefully the Labor rules are vague or loose enough to allow grandfathering to apply to all existing residential property. Not just ones which happen to be rentals AND negatively geared in the 19/20 tax year
     
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  8. albanga

    albanga Well-Known Member

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    IF everything is to pass and the changes were to come in as have been stated then you can be 99.999999999% certain it will be from contract date, NOT loan date.

    Anything else would make zero sense.
     
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I can envisage a use test. Otherwise every main residence is a potential negative gearing shift forever. And a new finance test and so on.

    Who knows ? The ALP could find a deadlocked Senate and not get it through.
     
  10. sash

    sash Well-Known Member

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    Labor's neg gearing policy .....its got to get through the senate untouched.

    Me thinks the independents will have a greater say and influence..I have a funny feeling if labor wins it won't be a landslide!!!
     
  11. TSK

    TSK Well-Known Member

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    This is what I’m thinking too, or at least evidence of intention if it’s not rented by the 1st.
     
  12. Daisycutter4

    Daisycutter4 Well-Known Member

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    Did everyone see the cover of the Fin today? Seems the Labor policy might have relied on some unreliable data.
     
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  13. Simon Hampel

    Simon Hampel Founder Staff Member

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    No - details?
     
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  14. Perthguy

    Perthguy Well-Known Member

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    My understanding is the data is from the Grattan Report. I have not seen a critique of the data in the report. I would be very interested to know what is wrong with the data
     
  15. Simon Hampel

    Simon Hampel Founder Staff Member

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    My accountant linked to the article on Facebook - basically, the Labor party's figures assumed that only 4% of current negative gearing tax incentives are paid to new stock - ie 96% of all people negatively gearing is for existing properties!

    The problem is that nobody - not even the ABS - publishes data that backs that up.

    The article went on to quote some people (such as @Ben Kingsley ) who suggested the figure is more like 30 to 50% of new housing stock.

    If it's 30% rather than 4% - then Labor's predicted savings would be nearly $8bn less (than the expected $35bn savings) over 10 years.
     
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  16. Alk

    Alk Member

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    There was an article today that suggested this figure from Labor really isn't justified anywhere which I suspect might be right. Lots of apartments being built have been rented by investors anecdotally. Many investors buy off the plan as something they can afford and for the tax breaks (depreciation) already.

    In any case what people don't realize is even if these investors don't directly invest in new housing AND indeed NG boosts the value of housing higher prices encourage more supply to be built as any basic economics textbook will tell you. In this case it encourages developers to build for more profit than they would be able to get otherwise and lobby governments to rezone land for higher densities. If prices weren't so high many would buy an existing house which would mean less demand for new types of property (e.g high rise) and less overall stock being built. The current system forces investors to take the risk by overpaying using NG as a buffer which encourages more supply to be built and let to renters. It's why I don't quite believe the argument that for every one less investor there will be a FHB taking their place - that assumes all else being equal on the overall amount of houses in the long term which it won't be.

    It's no coincidence the housing boom has caused governments to reduce restrictions on supply, vacancy rates to rise and convince people of apartment living where the supply realistically can be built in our built up cities - all in reaction to higher prices.
     
  17. Daisycutter4

    Daisycutter4 Well-Known Member

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    Sorry Simon – at the time the article was behind paywall so I couldn't repost - but you have since summarised it better than I could have.
     
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  18. TSK

    TSK Well-Known Member

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    8bn. So they'll need to adjust their budget numbers. Not a big deal. But illI inclined to trust government data more than anecdotal numbers from someone who has skin in the game for non-new stock
     
  19. AlbertWT

    AlbertWT Well-Known Member

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    18th May 2019.
    Hopefully, the new government will still honor the existing NG ruling.
     
  20. Ben Kingsley

    Ben Kingsley Well-Known Member

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    craigc and AlbertWT like this.

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