Investors beware: Government proposal could slash your negative gearing concessions

As the Government proposes a new tax reform package, wealthy investors who cash in on negative gearing concessions may be in its sights, skynews.com.au reported.

The Government is looking at different options and models for reform, and any change will be designed to bring about economic growth for Australia. But Prime Minister Malcolm Turnbull is reportedly sceptical that a rise in the GST, from 10% to 15%, is the answer. Instead, he’s been looking at other options, including cutting negative gearing concessions.

Sky News reported Education Minister Simon Birmingham as saying, “Malcolm Turnbull was just being incredibly open with people yesterday that at present he is yet to be convinced that any of the models and rearrangements of tax that he's been shown would necessarily get that lift in economic growth.”

Chief Executive of the Business Council of Australia, Jennifer Westacott, however, maintained that without a change to the GST, it will be impossible to deliver any meaningful corporate or personal income tax cuts.

She wrote in Monday’s Financial Review, “If the GST is not part of a total tax package, the nation's degrees of freedom to make a real impact on tax relief will be very limited.”

Related: Good news for investors as lenders reduce interest rates

On the other hand, should Turnbull decide to opt for the alternative and make changes to negative gearing, he runs the risk of making Australia’s issues with an undersupply of housing even worse, according to the Property Council of Australia.

“Two million Australians own an investment property. These people are doing the right thing and investing for their retirement or putting away for a rainy day.” Limiting tax deductibility on investment properties would make them more expensive, said the Property Council, damaging not only the national property market, but the personal livelihood of these investors.

It would also be a risky political move, considering 430,000 of these people live in the most marginal seats of both the Government and the Coalition, which is “enough voters to swing all of these seats eight and half times over.”

“Australians already pay $72 billion a year in property taxes – and property owners don’t want government’s hands reaching even deeper into their pockets,” the Property Council said.

In the face of a difficult decision, Deputy Liberal leader Julie Bishop has promised that cabinet would be looking closely at the viability of each option for its tax reform before making a move.

“We've been looking at different models, different options, and when the cabinet has determined which is the best tax mix for us to put to the Australian people, what is the best tax reform for the Australian people, then we will announce it.”

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