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‘No action warranted’ until Labor provides CGT and negative gearing clarity, says Tax Institute

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‘No action warranted’ until Labor provides CGT and negative gearing clarity, says Tax Institute

Labor’s proposed 1 January 2020 start date for its plan to restrict negative gearing and halve the capital gains tax discount has raised questions around its transition policy, with investors being warned against taking action immediately.

Tax&Compliance Jotham Lian 01 April 2019
— 1 minute read

Last Friday, shadow treasurer Chris Bowen announced that Labor, if elected, would set a 1 January 2020 start date to begin limiting negative gearing to new properties, with all investments made prior to the date to be fully grandfathered.

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Likewise, the CGT discount will be halved to 25 per cent for investments entered into after 1 January 2020.

Speaking to Accountants Daily, the Tax Institute’s senior tax counsel Professor Robert Deutsch said that the short time frame between the federal election in May and the proposed start date would be a “challenge” for Labor.

“The 1 January start date will be a challenge as, if elected, they will need seven months to negotiate with the cross-benchers who are likely to be quite difficult especially regarding negative gearing,” said Professor Deutsch.

Professor Deutsch also believes more details around the intricacies of the policy change will need to be clarified before investors make arrangements to deal with the changes.

“The interesting question will be exactly how the transition will be defined. Does refinancing after 1 January 2020 of an asset purchased before then bring you into the new rules or does everything work off purchase date?,” he said.

“The time frame may cause some activity in the property and share markets as people rearrange their affairs to deal with the new realities.

“I would advise no action until it is clear what Labor is proposing and that they will get it through the Senate. At this stage there is insufficient clarity to warrant doing anything.”

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‘No action warranted’ until Labor provides CGT and negative gearing clarity, says Tax Institute
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Jotham Lian

Jotham Lian

Jotham Lian is the news editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

With a focus on breaking news and exclusive analysis, Jotham keeps Accountants Daily readers up to date with company moves, tax updates and essential business and client strategy. 

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

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