Results of a study released earlier this month show that removing negative gearing would cut home prices by 1.2% and increase rents only slightly.
An earlier study done in 2016 by the Grattan Institute found that getting rid of negative gearing and the 50% capital gains tax concession would save the government $5.3bn.
The severity of the impact on investors would depend on how market sensitive the changes are.
The worst case would be if the changes were to apply to both existing and new investors when interest rates are rising and property prices are stagnant or falling.
Income tax and capital gains tax changes have not been retrospective, and that existing investors have been protected from the impact of changes.
In theory, a future government wants to maximise revenue and encourage the disposal of assets could apply the new tax provisions to all capital gains accruing after the date of the change. In technical terms, that wouldn’t be a retrospective change but it would pose difficulties for the Tax Office and investors.
Changes to capital gains tax are likely to apply only to new investors and affect only future demand for property.
Meanwhile, exempting investors in new properties from changes to negative gearing tax would favour high-level gearing of new houses. But the benefits would not necessarily offset the impact of the proposed 50% capital gains tax liabilities increase when an investor sells a property
Source Sydney Morning Herald 27-1-18