Insights on Tax
Taking the Axe to Negative Gearing
Negative gearing, the tax benefit of having more deductions that income on an investment (generally property), has been around for a long time but has also been in the cross-hairs to feel the axe of tax reform for a while too.
The latest swipe has come from the Murray Review of the Financial System.
Whats it all mean?
Theres generally been a view that negative gearing is beneficial to the well off, because if you're having to fund a loss then those with higher incomes have the disposable cash to do it. They are expecting the growth in value at sale time to more than make up for the losses.
Couple this with the general 50% discount on capital gains where you've owned what you're selling for more than 12 months, and the view is that the well off are getting all the breaks.
In my view every investment should stack up on the merits of what it earns, not the tax benefits. Focus on making money, let the tax take care of itself. Yes do all you can to minimise tax but keep your eyes on the prize of making money.
Then any changes to negative gearing wont matter.