11 Mar What a Labor Government Means for Property Investors
With the resignation of some major figures in the Liberal party, it looks like we are one step closer to a Labor government in May.
Labor have proposed two major changes for property investors:
- The removal of negative gearing on 2nd hand properties
- The reduction of the capital gains tax concession from 50% to 25%
The good news is that property bought prior to the yet to be decided date will be grandfathered. This means property investors who appreciate the attractive, long-term performance of
How might this look in numbers on a $600k investment property?
Whilst the impact of negative gearing will vary amongst individual positions, the capital gains tax is a little easier to calculate as in the example below:
Purchase before Labor changes:
Purchase price + costs: $600,000
Capital growth: 7%p.a
Value in 10 years: $1,180,291
Gross gain: $580,291
Taxable amount @ 50%: $290,145
Tax payable 37% marginal tax rate: $107,354
Net gain: $472,937
Purchase after Labor changes (same gross gain as above) :
Taxable amount @ 75%: $435,218
Tax payable 37% marginal tax rate: $160,031
Net gain: $420,260
Therefore, purchasing a $600k property before Labor’s proposed changes could save an investor on a 37% marginal tax rate a cool $52,677 over 10 years.
Add to this the negative gearing benefits now on offer and it becomes quite motivating to secure an investment property before the proposed Labor government changes.
The Sound Property Cashflow Calculator is a user-friendly tool for residential property investors, designed to give a quick estimate of the net operating in the first year of ownership. The Sound Property Cashflow Calculator combines the rental revenue and operating expenses of the property, with the percentage of income tax paid, to measure the net change in the investor’s weekly and annual income
This article is provided for general information only and does not constitute personal advice, as it does not take into consideration your personal circumstances. Please consult a licensed tax or financial advisor before making any decision to invest. Past performance is not a reliable indicator of future performance.