Key News Summary: Shadow Treasurer announces 6 month deferral of the start date for their proposal to restrict negative gearing and reduce the CGT discount. He also foreshadowed changes to the Managed Investment Trust tax law to professional investors into the ‘build to rent’ sector.
On Friday 29.3.19, the Shadow Treasurer: Chris Bowen made serval announcements, in an address to the Financial Services Council’s BT Political Series.
Delay start date for Negative gearing restrictions and reduced CGT discount
He announced that, if elected, a Labor Government would delay the commencement of its policy to restrict negative gearing and reduce the capital gains tax discount, by 6 months and would commence on 1 January 2020. He clarified, that an investment undertaken prior to 1 January 2020 could be negatively geared and would continue to enjoy current CGT discounts on disposal [though this is yet more grandfathering, with which to clutter the tax legislation].
He said that this was to give investors time to plan, but he also admitted this was to give them time to get the legislation passed – including consultation and getting it through the Senate [though this may still be too ambitious].
Build to Rent
Mr Bowen announced that, if elected, a Labor Government would reform the tax treatment for “Build to Rent” to ensure it’s a viable part of the housing market in Australia, just as it is in several comparable countries. He said:
“We will do this by ensuring Build to Rent housing can be included within a Managed Investment Trust when they meet requirements that are currently in place for commercial property assets, basically where they are a passive investment held primarily for the purpose of deriving rent.
This means that eligible Build to Rent investments will pay a 15% tax rate.
It will make ‘build to rent’ viable in Australia and provide a tax rate in keeping with the treatment in other countries. The central benefits of build to rent is it provides more stable long term tenancies and more housing in desired locations close to public transport and close to employment opportunities. … This is of course relevant to funds held under management in Australia and to Australia’s 2.7 trillion superannuation sector.
He asserted that this is an an internationally-proven way to provide better housing choices for people who rent their home and has proven successful in many countries around the world, including the UK, USA, Germany and Japan.
Comprehension (CPD) questions
- When, now, would their proposal to restrict negative gearing and reduce CGT discount start?
- Would an investment made before this date, still attract the old treatment (ie. will the changes be ‘grandfathered’)?
- What will be the tax change for ‘build to rent’?
- How will this increase the stock of rental accommodation?