Labor’s sweeping changes to negative gearing and capital gains tax are set to increase investor appetite for shares that pay dividends, commercial property, and self-managed super funds as the tax landscape receives its first major shake-up in decades.
Major changes to both capital gains tax (CGT), family trusts and negative gearing were proposed by the Labor government in Tuesday night’s budget, with investors given just over a year until the new regime is implemented. So how will investors be affected? What types of investments could fall out of favour? And what do industry experts think will take their place?
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Bryn Evans, adviser at Integro Private Wealth, believes these changes won’t entirely sap the demand for existing dwellings that are negatively geared, noting that many negatively geared properties become positively geared over time as debt levels are paid down.
“What I think investors may look at is if they have existing properties that become positively geared, they may be able to purchase a negatively geared existing dwelling and use the losses on that property to offset against the taxable income being generated on positively geared properties,” he says.
“But the days of people buying multiple existing dwellings that generate tax losses being written off against earned income to reduce income tax will become a thing of the past.”
Lastly, if you signed a contract of sale any time after 7.30pm on Tuesday night, you can negatively gear that property, but only until – you guessed it – July 1 next year.
