Election 2016: Family investors to lose $20k under Labor property plan

MUM and dad investors would be hit with an average $20,000 cut to their investment income under Labor’s policy to scrap negative gearing and double the capital gains tax.

The first independent ­economic modelling of Bill Shorten’s property tax policy predicts a 10 per cent cut to ­income returns for investors. Picture: Lisa Maree Williams/Getty Images

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MUM and dad investors would be hit with an average $20,000 cut to their investment income under Labor’s policy to scrap negative gearing and double the capital gains tax.

The first independent ­economic modelling of Bill Shorten’s property tax policy predicts a 10 per cent cut to ­income returns for investors.

It would also slash property prices by up to 4 per cent and have an unknown impact on the broader economy.

The report, produced by respected economics firm Adept Economics, concludes Labor’s policy is “not well-founded on theory or evidence” and is an “undesirable” way to address housing affordability.

It warns Labor’s plans to halve the capital gains tax discount would have a greater effect on investments than the twin policy of restricting negative gearing to new dwellings.

It concludes income returns would fall by 10 per cent over 10 years, which for the average investor would mean a loss of $20,000.

While the Turnbull government has focused its attacks on Mr Shorten’s negative ­gearing policy, it was the CGT that had the greater effect, Gene Tunny said. Picture: AAP Image/Lukas Coch

The modelling was commissioned by the Brisbane based accountancy firm Walshs, which said it was ­concerned about media ­distortion of the issue.

It is the first independent economic modelling to be ­conducted on Labor’s plans to restrict negative gearing to new homes and in effect ­double capital gains tax.

“We got motivated to get involved in this at the point when I heard Waleed Aly rant on the Project and realised that there was so much disinformation about this policy,” Walshs Financial Planning head Simon Farmer said.

The economist who wrote the report, Gene Tunny, said the CGT changes proposed by Labor would have a significant impact on investment returns, the property market and ­potentially the economy as a whole.

“The Opposition’s policy proposal is an undesirable way of dealing with what may be the true ­policy problem behind housing affordability concerns — the restrictions on land ­supply and housing developments due to planning ­policies,” the report says.

While the Turnbull government has focused in its attacks on Mr Shorten’s negative ­gearing policy, it was the CGT that had the greater effect, Mr Tunny said.

“The main part of the impact is CGT. That is the thing to be most concerned about …. large increases in capital gains taxation which will have a much bigger effect on the property market. We can only speculate the wider economic impacts … potentially there could be flow-on impacts.”

“Restricting negative gearing to new properties and reducing the capital gains tax (CGT) discount from 50 per cent to 25 per cent, as proposed by the federal Opposition, would significantly reduce the rates of return for investment properties purchased after July 1, 2017,” the report says.