this follow up in The Australian speaks to the unintended consequences of potential tax changes.
It’s true to say that many of said apartments would have been negatively geared. Put another way, the rent charged was sub-economic – i.e. less than the renter would need to be charged if losses could not be claimed via #negativegearing.
This means #investors were relying on #capitalgain to make up for the income losses, which of course didn’t occur in many cases.
The triple whammy is that capital losses can only be offset against future capital gains, not income (unlike negative gearing). Many of these loss-making investors will be scared away or unable to invest again, leaving these losses permanently unavailable.
Fiddling with negative gearing and capital gains discounts will further reduce investment in such units. Doubly so in jurisdictions like Victoria where you are more likely to need negative gearing due to the costs of holding, AND make a capital loss.
Anti-negative gearing hawks need to understand that removing it could, in the short term, put have the “positive” impact of shifting existing housing stock into owner occupier hands by pushing investors out. That might sound good.
But in the long term, think less investor-owned rental supply, and also less land tax from investors for our tax hungry States.
#BTR operators won’t be taking losses on rent at their hurdle rates, I assure you.
It’s critically important to think about the unintended consequences of the big “tax reform” agenda being discussed. As I’ve warned in the past, what might be perceived as short term gains could result in even worse #housingsupply conditions in future. Melbourne is the case study.
P.S. It’s a strange world when you can be quoted in the media based on a LinkedIn post alone James Kirby! It would be even better if the name of my business was spelled correctly in the article.