Property investors should be left alone
SOPHIE ELSWORTH
July 2017:
Depreciation deductions limited to purchases of new properties, fixtures and fittings
July 2017:
Tax deductions banned for travel expenses incurred by landlords to visit properties
January 2020*:
Negative gearing tax deductions restricted to newly built properties
Capital gains tax discount to halve from 50 to 25 per cent
January 2020*:
COUNT THE COST:
I AM a property investor and I am certainly not rich.
The perception is that the two go hand in hand, that if you have an investment property you’re rolling in cash.
According to the latest Australian Taxation Office data, the nation has 2.1 million property investors and a majority (1.5 million) have one investment property. That’s me. A 2016 CoreLogic report found the average property investor earned between $60,000 and $80,000 annually and 50 to 64 year olds were most likely to own an investment property. So the proof is in the pudding.
In most instances, property investors are hardworking, honest Australians who are trying to plan for their future and have a good investment vehicle working for them.
But it’s bugging me how the fat cats in Canberra are putting their grubby mitts all over property investors when they would be better to leave them alone.
That’s exactly what they’ve done to superannuation through constant tinkering with the rules.
Labor, which is likely to be in office after next month’s federal election, revealed it would change negative gearing rules from January 1.
Negative gearing tax deductions would be restricted to newly built properties, and that’s what worries me. While the aim for many investors is to have a positively geared property, having it negatively geared keeps it manageable for many.
I’m worried about what the rule changes will mean.
I purchased an existing property, a two-bedroom unit on Brisbane’s northside, back in 2012 and, after a couple of years, moved out of it.
It’s been rented out ever since and is a nice investment vehicle to have on the side.
What concerns me is that if I go to sell it, why would an investor buy it or any existing property over a new build under the proposed rules?
If I was an investor I would want to take advantage of the negative gearing tax deductions that will only come with new properties if Labor’s new legislation gets in from January 1. Labor is also going to halve the capital gains tax discount from 50 to 25 per cent for any investment gains made from purchases after January 1.
For example, if you sell your investment property with a profit of $100,000, you will only get a CGT discount on 25 per cent, not 50 per cent of the profit. Another sting in the tail.
This is making property less appealing for investors, both existing and new.
We already had depreciation deductions chopped by the Coalition back in 2017 and so, too, were tax deductions for travel expenses incurred by landlords to visit their properties.
Renters, too, will be hit as more investors pull out of the market. Why not just leave the whole thing alone?
PERSONAL FINANCE WRITER