Negative gearing currently allows many investors to offset rental property losses against other taxable income, such as salary. The proposed reform limits this treatment for residential property. The policy is designed to encourage investment into new housing supply rather than established housing.
The key distinction is straightforward: new residential builds may continue to qualify for negative gearing, while established residential properties purchased after the relevant cut-off may have losses quarantined or restricted. Existing arrangements are expected to receive grandfathering treatment. Commercial property is not the main target of this change.
For investors, this means after-tax cash flow modelling becomes more important than ever. The key questions before any purchase are whether the property is residential or commercial, whether it is new or established, when it was purchased or contracted, whether it was held before the relevant announcement date, how ownership is structured, and whether depreciation deductions are being claimed correctly.
Koste can help investors review the depreciation and property deduction side of the cash flow picture.
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