Labor has unveiled plans to limit the negative gearing tax break to newly built housing and end it for existing homes.
At the NSW ALP state conference in Sydney, opposition leader Bill Shorten announced changes to negative gearing and to the capital gains tax discount to ensure a “level playing field for first home buyers competing with investors”.
The tax break, which allows property owners to reduce their overall taxable income by deducting losses from the investment, has been criticised as giving investors an unfair advantage over first home buyers.
“We will put the great Australian dream back within the reach of the working and middle-class Australians who have been priced out of the housing market for too long,” Shorten said.
“Mum and dad investors who have a house or apartment that is negatively geared right now will keep the deductibility, but after 1 July 2017, negative gearing can only be accessed for new houses.”
Shorten says the move would save the federal budget $32.1 billion.
“Under a Labor Government, the family home will always be 100% capital gains tax-free and these two reforms that we announce today will save $32.1 billion and help put fairness back into the housing market.”
Shorten cited rising house costs, saying that “30 years ago, houses cost around 3.2 times average income — today it’s 6.5 times average income.”
Here are the main changes below:
- Negative gearing will only apply to new housing from July 1, 2017: Investments prior to this will not be affected with taxypayers eligible to deduct net rental losses against their wage income.
- Capital gains tax discount to be reduced from 50% to 25%: The capital gains discount will be halved for all assets purchased after July 1, 2017 but will not affect investments made by superannuation funds.