There will almost inevitably be unintended consequences flowing from any changes to the negative gearing regime, according to H&R Block.
Labor has talked about removing negative gearing for all but new properties (and also grandfathering current arrangements, so taxpayers currently negatively geared would not be affected) and it could impact both the wealthy and lower income earners.
Mark Chapman, H&R Block’s director of Tax Communication points to Australian Tax Office (ATO) figures showing that 72% of investors with negatively geared properties earned $80,000 or less (2011-12 figures) and suggested the removal of negative gearing stood to impact many middle income families, who may be forced to sell their property as they see their tax bills rise.
Modelling by tax accountant H&R Block of the impact of Labor’s proposed changes indicate a taxpayer earning $220,000 a year, with two investment properties worth $450,000 and $550,000 each, would be about $19,000 worse off every year if these investments were made after July 1, 2017.
The Bottom Line:
Don’t panic – in fact, don’t do anything at present.
All the commentary is currently based on speculation and no one really fully understands the implications of the proposed changes yet.