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Tax Institute clarifies negative gearing point of confusion

Tax Institute clarifies negative gearing point of confusion

Labor’s proposal to introduce restrictions on negative gearing will apply across the board to all investments, the Tax Institute has confirmed, after members raised questions about the scope of the reforms. 

Tax&Compliance Jotham Lian 08 November 2018
— 1 minute read

The Tax Institute’s senior tax counsel, Professor Robert Deustch, has confirmed with Labor that proposed changes to negative gearing would apply across the board to all investments.

Previously, given the public focus on property, some members and their clients thought it only applied to property investments.

“The overall impact of Labor’s negative gearing proposals is not likely to be nearly as draconian as some sectors seem to be suggesting. The good news is that the proposed restrictions to negative gearing would apply on a global basis to every taxpayer,” said Professor Deutsch.

According to Professor Deutsch, the confirmation means individual taxpayers will need to consider 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. Importantly, you will not have to look at each individual investment, or at any particular asset class – that would have been a very onerous and cumbersome exercise.”

“It would continue to allow people to hold for example, four, five, or six properties with some positively geared and some negatively geared. Provided the overall positives exceed the overall negatives, there will be no problem.

“For investors, this is at least some good news and actually brings us into line with what happens in many other countries, for example the United Kingdom.”

The ALP says its negative gearing policy has always been applicable to all investments. Its policy documents do suggest this, however, the party's focus publicly has been on the impact the policy will have on housing affordability. 

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Tax Institute clarifies negative gearing point of confusion
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