With more and more hints being made about changes to negative gearing, it is probably time for Australian property investors who rely on the tax breaks they receive from negative gearing to start looking into how they would cope with changes to their cash flow.
The government has announced that it plans to target ‘excessive’ use of negative gearing. This has been interpreted to result in either a restriction being placed on the number of properties that can be negatively geared in a portfolio or limiting the tax offset that can be claimed.
While an official statement on negative gearing is yet to be made, it is clear that the strategy will be undergoing some serious changes in the upcoming May Budget.
Commentators have warned of the impact the supposed changes would have on existing property investors who (while still being able to make use of negative gearing tax breaks), may lose out when they sell their properties if the changes put off buyers.
For those landlords left with a cash flow shortage, it may not necessarily be as easy as simply putting up the rent since rents are a factor of supply and demand. Investors who do increase rents to make up for their cashflow shortfall could risk losing tenants and be left with vacant properties.
While no further details have been provided, the overall the message is clear: changes to negative gearing are coming.
