Negative Gearing and the 2019 Federal Election

Negative gearing is a genuine point of difference between the two contenders in the upcoming Federal Election. The Coalition Government has promised to keep it. The Labor Opposition has vowed to abolish it for all properties – apart from properties that are currently negatively geared and brand new ones purchased after 1 January 2020.
The potential demise of one of Australia’s most effective tax relief mechanisms has understandably triggered fierce debate across the political divide.
Negative gearing provides a valuable safety net for property investors, in particular those holding portfolios with lower rental yields. Often, the monthly interest payments on these mortgages will exceed the property’s net rent (gross rent minus expenses such as repairs, rates and agency fees).  This is when negative gearing comes to the rescue; applying the difference as an income tax deduction.
For investors with multiple properties, the deductions can comfortably sit within the five figure bracket each year. Investors rely on negative gearing to lessen the pain of maintaining their mortgage while waiting for their property’s value to increase. On one hand, it’s an enormous tax relief for the individual. On the other, it’s a significant deprivation of income for the Government.
Labor’s platform also includes reduction of Capital Gains Tax concessions uponthe sale of investment properties.
Should Labor leader Bill Shorten emerge as Prime Minister after the May 18 poll, the ensuing seven months could be a very interesting time for the Australian property market. Currently experiencing a downturn after a period of extraordinary growth, the market could undergo a brief revitalisation should investors rush to buy properties as the door starts to close on negative gearing.
With large parts of Sydney still unaffordable for many investors and occupiers, the Central Coast market has held up relatively well during the current housing slump. If the area’s resilience is any guide, it could prove a hot bed if we do see a buying flurry taking advantage of negative gearing’s last hurrah.
If negative gearing is attracting you to enter, or re-invest, in the property market, time could be running out. Our property and conveyancing team are available to answer all your questions about the benefits of getting in before the door closes.