On 8 Nov 18, The Tax Institute (TTI) issued a media release, providing detail about the Labor Party’s negative gearing restriction on investments.
- The bad news is that the proposed limitation on negative gearing deductions will apply to all investment types (not just real estate with a new constructions exemption).
- The good news is that this will be applied on on a ‘global’ basis – which is to say that it will limit total investment related deductions to the amount of total investment income. This means that taxpayers will not have to track individual investments or individual investment classes. It also means that a number of investments could be negatively geared, as long as they are off-set by an equal quantum of positively geared investment income.
- This excess will need to be carried forward for offset against future investment income or capital gains (noting that ‘net capital gains’ are assessable income, so deductions can offset those assessable amounts).
- It appears that this would actually bring Australia into line with many other countries: the United Kingdom, for example.
The Australian Financial Review picked up this story and published it on 16 Nov 2018 (John Kehoe), who reported:
“Labor’s policy has not changed since details were announced before the 2016 federal election, but few analysts and investors have dug in to understand the finer details.”
[LTN 216, 8/11/18; Tax Month – November 2018]