Over the past few months there has been much debate and discussion regarding proposed changes to the negative gearing tax incentives on a property investment, from both sides of politics. However, it was announced in the news last month, by the finance minister Mathias Cormann, that if there is a change to the negative gearing rules, those changes would not be made retrospective.
For those of you that are unacquainted with the actual definition of Negative gearing, it is a form of financial leverage, whereby the income you earn from a property investment is less than the cost to hold the property, including interest payments on the mortgage. So basically, if the property is costing more than its making, you can claim a tax deduction.
Many believe that negative gearing is a hand out to the rich when in fact more than 70% of the 1.9 million Australian property investors, own, only one investment property and have a taxable income of less than $80,000. So hardworking, every day mums and dads, trying to get ahead and set themselves up for a secure retirement.
The proposed changes to property investment tax planning legislation, may occur under new government policy, after a likely mid-year federal election. And, we are expecting both liberal and labor to implement a policy which amends (to some extent) the negative gearing tax incentives on property investments.
The opposition has expressed their wish to apply the new laws retrospectively, which means any investors who decide to buy a property investment prior to any legislation will not be affected by the changes. This is what they call ‘grandfathering’ legislation.
This is of course, very encouraging for existing property investors or anyone who decides to buy a property investment prior to the legislation amendments mid-year. However, not so good for anyone who waits until after the election to invest.
As we’re expecting double digit growth across pockets of South East Queensland over the next 2 years, very low prevailing interest rates for several years to come, and expected changes to legislation for future investors post-election, now is certainly the time to closely consider investing in property.