The Tax Institute said it has received confirmation from the Australian Labor Party (ALP) that its proposed changes to negative gearing would apply across the board to all investments, after it was widely thought that the negative gearing restrictions might only apply to property investment.
However, Professor Robert Deutsch, Senior Tax Counsel with The Tax Institute, said 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,” Deutsch said. “This means that Individual taxpayers would need to look at 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.”
Professor Deutsch said the policy 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,” he said.