Small businesses to lose out from proposed negative gearing changes

More than $1.8 billion per year in repair and maintenance work on negatively geared homes could be lost if Labor goes ahead with its policy to impose restrictions on the measure.

Negative gearing allows investment property owners to offset costs against rental income and claim any loss as a tax deduction. If elected, Labor said it would restrict the benefit to newly-built homes from 1 January 2020 and halve the capital gains discount for all assets purchased after that date.

According to Denita Wawn, chief executive of Master Builders Australia, the move attacked the small businesses who carry out this repair work on the properties.

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Across Australia, around $1.8 billion is spent annually on repairs and maintenance of negatively geared properties.  The biggest proportion, some $515 million, was spent in New South Wales followed by $509 million spent in Queensland.

“Thousands of small mum and dad building businesses and tradies in every city, town and region around Australia would feel the impact of Labor’s policy progressively if it is rolled out,” said Wawn.

“This work is the bread and butter of so many builders and tradies and Labor’s policy will hurt the viability of their business and will put their livelihoods at risk.”

She said the move was particularly important given the falling housing markets in cities like Perth and Adelaide.

“The next Federal Government needs to back the thousands of small building businesses who repair and maintain negatively geared investment properties, especially as the housing market softens, not bring in policies that will put their businesses at risk.”

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Those ex-negatively geared homes will be still in existence. So why will those residences and apartments no longer require repairs and maintenance?
It is obvious that negative gearing artificially increased the prices of repairs and maintenance charged by contractors and thereby affecting those owners who had to pay over the top for repairs, maintenance and improvements to their non-negatively geared residences and apartments.
The squeals of those with their noses in the trough.

Many small businesses use trusts as a simple business structure. I see they will suddenly become nonviable. I admit I don't understand the 30% tax, but I assume it means that income will be double taxed. First by the trust and then in the hands of the individual. Often small business have put their investment property inside the trust as well. It will be a mess, especially after the senate play with the legislation. The fear, and confusion will cause people to make crazy decisions.

Good points but lets hope they use good financial advisors and accountants to hold them back from making crazy decisions.
Trusts as used by business have become more about tax minimisation and not about assurance of succession and business continuity.
Arranging businesses, investments etc to focus on tax minimisation is not necessarily the best option to maximise returns on capital.

yes well if you want restructuring advice, your accountants fees have been capped as well I think. So capped fees for one industry and subsidised wages for another ( childcare) - it all does sound like socialism.

The need to subsidise wages for underpaid child care workers sounds more like capitalism. Parents can't meet the costs of child care because their wages are flat against rising costs and profits - that too sounds like capitalism.

we have the 3rd highest minimum wage in the world, that doesn't wash. And we all know by evidence the results of socialism, but hey good luck getting socialism back up in the modern world, when union numbers continue to decline - why else do you think they need to control super? Because they've lost their mandate from working people.

Socialism is not my game. Consideration of the less fortunate and less privilege in our community is not socialism.
The minimum wage might be high but then so is the country's prices and costs to wage earners. Profits are rather high as well, but trickle down economics has been shown to be a figment of neo-economists' imaginations.

Hedware, I hope in your capacity given by your employer that economics is not one of them.

It should be lots of fun.... Imagine a testamentary trust or a deceased estate trust. Are we going to tax them at 30%? Politically - taxing a little old lady who has just lost her partner of 60 years would be ugly. The press will love the policy to death. Perhaps we can solve the issue with only 500 additional pages of legislation. I'll be rich sorting the mess out.

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