Capital Gains Tax Changes

When you are thinking about your investment assets, keep in mind that it is Labor policy to reduce the discount on taxable gains from 50% to 25%. I have been assured by Chris Bowen’s office that this will not be retrospective, and accordingly will not apply to any properties purchased before Labor puts their changes into effect.

But you still need to think about the effect on the property market when this policy becomes more public, and the election draws near. It could well cause many investors to sell properties in the belief that the combination of an increase in capital gains tax, and the restriction on negative gearing, may make investment property less attractive as a class and therefore lead to a reduction in prices.

Alternatively, investors may take the view that a pre-Labor capital gains tax property is worth holding on to, which could reduce the number of investment properties on the market and even push up prices. Now add to this heady mix the certainty that interest rates will go up, and that when this happens property prices are likely to fall.

The long and the short of it is that you cannot know what the market will do. In my view, the major factor in any decision should be the potential of the property you own.