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Australia’s Property Sector Braces for Negative Gearing Changes
Real estate builders and investors are bracing for proposed changes to negative gearing and capital gains tax after Labor secured Greens support for its tax reform package. The measures, which are expected to pass Parliament this week, have intensified debate over housing affordability, investment returns and the future of property taxation in Australia.
Labor's reform of the tax system appears on track to progress through Parliament after the Government locked in support from the Greens for its reform of negative gearing and capital gains tax settings.
The reforms, spearheaded by Prime Minister Anthony Albanese and Treasurer Jim Chalmers, seek to address tax inequity and house price affordability, and ultimately enable more Australians to access the property market.
According to the Government, reforms will narrow the divide between incomes and wealth by improving tax neutrality, as well as delivering tax cuts to millions of workers. It would provide a tax cut for 13 million workers, “enabling more renters to get on the housing ladder,” according to Housing Minister Clare O’Neil.
Critics, however, contend Labor abandoned prior commitments made to the Australian public on investment property taxation, with both sides accusing each other of shifting policy on previous stances.
Reform legislation clears Parliament hurdle
The backing of the Greens will boost Labor’s broader agenda to reform taxation of income earned from wealth.
As part of an agreement, the Government will also limit new limited recourse borrowing arrangements that can be accessed via SMSFs for residential property investments, as well as prevent future governments from amending its reform package at a later date.
Other arrangements will be exempt. “It will also bolster the integrity of our tax system and improve access to housing for generations to come,” according to Treasurer Jim Chalmers.
Property sector prepares for reforms’ impact
Developers, builders, and property investors will have a keen eye on how the reform to capital gains and negative gearing will change property market dynamics. The impacts on investment returns, cash flow and property values will likely be carefully analysed.
While Treasurer Jim Chalmers insists the reform package would result in a fairer tax system while also making housing more accessible, the Opposition said the measures would betray Labor’s earlier promises regarding investment property taxation and underscore a rising reliance on the Greens for supply votes in the Senate.
Source: The West
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