Bob Dylan said it best ‘For the times they are a-changin’.
There was a time when you knew that if you bought an asset, held it for at least 12 months and then sold it, you would only pay tax on 50% on the capital gain, this has been the norm since 1999.
But now it seems that times maybe changing.
There is talk that the capital gains tax discount for investment properties may be removed, resulting in a saving for the budget of about $4 billion a year. Just as there was previous talk about removing negative gearing, but for the time being that has been taken off the table.
Others recommended a cut in the CGT discount to 25%, this would reduce the benefits of negative gearing, but it would not be eliminated. This would save the budget $3.7 billion a year.
There is another train of thought – to phase in the concession, the property would have to be held for several years before the full 50% concession was granted.
Some think that cutting the tax breaks on capital gain in property would initially have a short-term downward impact, but in the medium term it will put substantial upward pressure on all housing, as new supply will be significantly reduced, which will lead to a greater housing shortage.
Everyone has their opinion, labour, the coalition, the greens. The government needs to be careful if it is considering changing the CGT discount. Care needs to be taken, as the changes to the capital gains tax may split the coalition.
So, for the moment, nothing is set in stone, it is a matter of watch this space.
ZOI YANNAKIS – ACCOUNTANT
