“For more than a month, the conventional wisdom has been that the Turnbull government has ruled out changes to negative gearing as part of its housing affordability policy.” the opening paragraph by Dennis Shanahan for the Australian.
It is my belief that the liberal party’s adoption and implementation of a labor party strategy throws mud in the face of mums and dads property investors who are reliant on negative gearing to help fund their retirement. Surely any opportunity by hard working Australians to alleviate the country’s ever-increasing burden of the cost of old age pensions must be looked on as a positive step?
But why did the liberals adopt such a policy and turnaround from their basic ideology? Was this just a badly thought out knee jerk reaction to their dwindling support. Even the ATO were caught off guard, when contacted yesterday an asked how the new law was going to work, they replied that they are working on the legislation and could not provide a definitive answer to the legislation which was adopted 8/5/2017 or was it?
RESTRICT NEGATIVE GEARING TO NEW HOUSES
A Labor government spokesman stated that in government they would restrict negative gearing to new houses from July 2017, with existing negatively geared investment properties exempted from the changes.
Bill Shorten says the policies will “help level the playing field for first-home buyers, competing with investors … and … put the great Australian dream back within reach of working and middle class Australians, who have been priced out of the market for too long.”
When Labor indicated last year it was considering negative gearing changes, the liberal party policy ruled out the move, even though the Reserve Bank had suggested it should be considered to help combat debt-fuelled property speculation with Joe Hockey jumping into the debaet and endorsing the idea.
“Negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property,” he said.
Malcolm Turnbull has said all tax options remain on the table and the government is looking at negative gearing changes, but treasurer Scott Morrison has repeated that changing the policy could push up rents with most property investors not the top end of towners but mums and dads investors; “school teachers, police officers, nurses and office workers saving and investing to provide for their financial security.”
NO PLANT AND EQUIPMENT
The changes mean that if you are NOT the original owner of the property you are NOT eligible to claim the depreciation on the plant and equipment portion of the property, which in most properties range from $12,000 to $24,000 on average, dependant on the construction cost and inclusions. The budget paper wording states, that the plant value will be added to the base cost and is claimed when the property is sold, subtracted from the capital gain before the capital gains tax is calculated?
But what is the case if a property investor purchases a second-hand fridge (reconditioned) can they depreciate it? the tax system needs to be simpler as both governments agree, but at every consecutive budget the tax system gets more confusing and messy as each party tries to claw back taxes on the battlers and NOT the big end of town. To reduce depreciation to mums and dads investors by 1 or 2 thousand dollars per year whilst bank CEO’s are being paid 4, 5 and 6 million dollars each year throws mud in the face of those mums and dads.
It will be interesting if property in Australia will become more affordable or will it be just another hit to the overtaxed property investor?
a blog written by, James Hannah Tax Depreciation Specialist.