My understanding Negative Gearing on the property market is about $3B cost to the govt of which 10% is only used on new property. We have a strong culture to buy investment property with the intent it looses money, this is foreign to the much of the world.
- I'd put an immediate band on Negative gearing on new loans for existing properties
- Costs can however be deferred until the property makes a profit
- Existing loans remain protected and can be used for Negative gearing for up to 15 years.
- New properties are unaffected for the first 15 years or until the property is sold.
- CGT remains, paying 50% of the profit at your marginal rate is not a bad deal. Does not apply to owner occupier.
- If the property is refurbished/redeveloped to the value exceeding 50% of its previous price, it can attract Negative gearing for 10yrs.
I don't believe we will see a significant shift in rents if at all. People will just move and existing rents are protected as no changes to those properties.
It will have a slight impact only on reducing house prices as not enough properties are negatively geared and none of these are affected for 15 years by which time they should be profitable.
This should peg Negative Gearing costs to govt and steadily reduce over coming years and eliminate what is effectively subsidised middle housing.
Oh and I don't buy this crap about bracket creep eating into incomes and something must be done with GST or other. Why not simply raise the brackets? Link them to CPI?