For many years, negative gearing has helped Mums and Dads to plan their retirement and make the most of the tax incentives available. Recently, however, negative gearing has taken the spotlight once again, as Labor released its proposed changes to the policy.

Negative gearing has been contentious for both sides of the political spectrum as detractors say it only benefits cashed-up investors, which is a huge misconception. What’s in it for the Mum and Dad investors then? Will the proposed changes help them secure their financial future?

Proposed Changes

Labor Leader Bill Shorten said that the current policies on negative gearing and capital gains discounts are draining the government budget. In its proposal, Labor specified that it wants to limit negative gearing to newly built properties. They argue that this will make it easier for first-time home buyers to enter the market and encourage building of new homes.

The changes may place investors in a worse position if they make the investments after July 1 2017, according to the modelling tax accountant H&R Block. “In such a scenario, many investors would probably exit the property market or put up the rent,” Mark Chapman, Director of tax communications said investors also faced the risk of selling off their properties for a lower value if left with high vacancy rates.

Malcolm Turnbull responded to the proposal by saying that it would “smash the residential housing market”. Federal Treasurer Scott Morrison also said in an opinion piece,“I have always believed that negative gearing gives hard-working Australians a chance to build some wealth they would not otherwise get.”

Fighting for the Mum and Dad Investors

Julio De Laffite, founder of JDL Strategies, has weighed into the debate on behalf of Mum and Dad investors. In a recent press release, he was quoted saying: “It seems to me that any attack on property investing would hurt mum and dad investors most. They are the people I see every day. They are all trying to plan for their own retirement so that they don’t become a burden on tax-payers when they retire. Why would any reasonable government penalise them for trying to provide for themselves.”

Two thirds of Australians who use negative gearing have a taxable income of $30,000 to $80,000. These are the regular citizens who only want to secure their financial future.

“The impact of abolishing, or restricting negative gearing would unleash a shockwave that would be felt by all Australians. The housing industry employs a lot of people and any slowdown in that sector would mean a severe drop in spending on a range of household and general consumer items. In short – it would cause a shudder in the entire economy.”

Mr De Laffitte assures property investors that he will keep fighting for the fair opportunities for Mum and Dad investors.

To find out more insights about negative gearing, check out our blog page. You can also talk to our Client Managers to discuss about your property investing plan.