If elected in 2019, federal Labor plans to introduce restrictions on negative gearing for investors.
While most attention has been on the impact on property-based investments, reports suggest the policy change also will significantly affect other forms of negatively geared investments, including shares.
Cuffelinks newsletter reports that under the change, the excess of interest expense over income (such as rent or dividends) cannot be utilised against salary and wage income. It must be carried forward for offset in future years against future investment income or capital gains from the disposal of the investment assets.
The newsletter analysed the proposal by looking at three case studies of negatively-geared investors. While those who invested in property and shares were adversely affected, the investor who negatively geared into property and shares and who used their own funds to purchase 2% pa interest-generating treasury bonds experienced overall neutral impact.
Read more here.