The federal government is looking at ways to cap the use of negative gearing in a bid to ensure fairness in reforms that will offer income tax cuts without needing to expand the GST.
The plans include setting caps of $30,000 or $50,000 on the amounts that workers can claim on their investment properties, in order to target the changes at those who gain the lions share of tax breaks worth $8 billion a year.
The overriding objective remains to cut income taxes for ordinary workers and that cuts to company tax remain on the agenda.
While Mr Morrison emphasised the gains from the change, Malcolm Turnbull highlighted the problems with a tax mix switch where the higher GST paid for income tax cuts. Now, you have got to remember that what all this is doing is just simply moving the tax burden from one part of the system to another. It is not actually reducing tax overall, the Prime Minister said.
Negative gearing allows tax deductions on the mortgage and other expenses of an investment property, cutting a tax bill. The taxpayer also gets the benefit of a 50 per cent discount on capital gains tax on the increase in the value of the property. When combined, the tax concessions cost the commonwealth about $8bn a year. A cap on the claims could trim the benefits for wealthier investors, but not hit ordinary workers.
Assistant Treasurer said she was not convinced yet and argued that any changes could have unintended consequences on the property industry.
