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If reform happened this year, that buyers have a limited window to take advantage of negative gearing which allows for property-related expenses, including mortgage repayments to be claimed as tax deductions against your taxable income.
At the moment you have a situation where the Labor party is pressuring the Turnbull government to reform negative gearing in the May Budget to effectively help first home buyers and boost construction activity.
This means that if reform happened this year, that buyers have a limited window to take advantage of negative gearing which allows for property-related expenses, including mortgage repayments to be claimed as tax deductions against your taxable income.
Urbis chief economist Nicki Hutley expects that the Turnbull government will hold fire on reforming negative gearing because they won’t want to be seen as “being pushed into reform” by Labor.
Labor wants to scrap negative gearing on existing homes, which accounted for 93 per cent of the $155 billion of property investment made last year, according to Bloomberg.
“I think it is a poor policy,” added Domain Group chief economist Dr Andrew Wilson. “This potentially could lead to an avalanche of property investors into the market and exacerbate property and rental prices.”
The Liberal Turnbull government is mulling over either ending negative gearing for certain new properties in 2017 or targeting high-end investors by either capping the number of properties that can be geared or limiting the size of the annual tax deduction that can be claimed, according to the Australian Financial Review.
But Dr Wilson believes that the government is more likely to “cap” the existing rules around what deductions can be made in negative gearing.