Prime Minister Anthony Albanese neither confirmed nor denied the report from the Sydney Morning Herald but acknowledged that changes to negative gearing and capital gains tax concessions are being considered.
But what exactly is negative gearing, and how do these tax concessions impact investment properties?
What is negative gearing and how does it work?
Negative gearing allows investors to deduct losses from their property investments against their total taxable income, potentially reducing their tax bill.
In practice, this means investors can offset expenses like mortgage interest payments against rental income, resulting in a net loss that can be used to reduce taxable income.
What does capital gains tax have to do with negative gearing?
Australia’s concessions on capital gains tax, where only half the profit from selling an asset is taxed, make negative gearing attractive for investors looking to benefit from capital growth in property values.
“While making a loss on an investment property or shares might initially seem counterintuitive, some people are willing to do this in the expectation that the capital gain when they sell the asset will more than offset that loss,” as explained by federal Treasury.