Labor’s negative gearing modelling put under questioning

Labor plan to limit negative gearing concessions to new properties from January 1 2020, earlier than many analysts and commentators predicted.

Shadow Treasurer Chris Bowen said the long-awaited start date would still provide enough time for scrutiny of the legislation and more industry consultation.

In March, Bowen announced that, from 1 January 2020, they would “make sensible and overdue changes to negative gearing to put young first home buyers on more of a level playing field with property investors seeking their sixth or seventh property”.

He dismissed calls to delay or phase in the change, which is a key point of difference between Labor and the Coalition before a May election.

“This allows it to come in at a quieter time in the property cycle – obviously Christmas and New Year being a quieter time – a good smooth time for implementation,” Mr Bowen said.

The change would stop new investors from deducting rental losses from their income tax bill, raising an estimated $2.9 billion over four years.

Federal Labor has argued this concession is too generous and is unfair because it makes it harder for younger Australians and first-home buyers to enter the market.

Ending the tax concession on January 1, rather than July 1 as many expected, would mean a Labor government begins to collect a share of that $2.9 billion earlier in its first term.

Mr Bowen also argued that delaying the change until property prices recovered from a recent downturn in capital cities would only increase market uncertainty.

Labor eyes crossbench amid Coalition criticism

The Assistant Minister for Treasury and Finance, Zed Seselja, warned the January start date would hurt both homeowners and renters.

“I think it means the pain in the property sector and for millions of Australians would start earlier than expected if Labor comes into office now,” Senator Seselja said.

“Just last week we had SQM Research talking about massive rental increases right across Australia if Labor’s policy is enacted.”

If Labor wins the election, it may still need to negotiate with a Senate crossbench that will still include Pauline Hanson and Cory Bernardi.

“I will be making the case directly and personally to the senate that we have taken this to not only one, but two elections. We have been upfront about these discussions.”

Labor to boost tax concessions for institutional investors

The Federal Opposition has also announced it will reduce taxes for institutional investors that build rental properties.

Labor would cut the managed investment trust withholding rate in half, on tax distributions attributable to investments in build-to-rent housing.

“This means that eligible build-to-rent investments will pay a 15 per cent tax rate, not the 30 per cent rate proposed by Scott Morrison, which would be double the rate paid for investments in shopping centres and office buildings,” Mr Bowen told a Sydney audience.

“It will make a build-to-rent [project] viable in Australia and provide a tax rate in keeping with the treatment in other countries.”

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