May 4, 2011
With Treasurer Wayne Swan busy tinkering with the next budget, there have been suggestions that cutbacks on tax concessions for investment properties are on the agenda.
Under the current system, mum and dad investors can claim any losses from their residential investment property as a tax deduction, which is designed as an incentive to generate continued investment in the rental property market.
The flipside of this of course is that this process does escalate housing prices, and with affordability at a major low, the Government is under pressure to find ways to help people own their first home.
Possible amendments to the current laws include:
- A reduction in the benefits of negative gearing for those with multiple investment properties.
- A new sales tax on investment properties
There are concerns however that these initiatives will discourage investment property buyers, resulting in even fewer rental properties, and therefore increasing rents.
President of the Real Estate Institute of Australia David Airey believes that, “The sustained health of the rental property market depends on continued investment. The rental market is already extremely tight and the changes the Government is proposing could have a very negative impact on the future supply of available rental properties.”