Shadow Treasurer Chris Bowen announced on Friday that if Labor wins the Federal election, it will put its planned changes to negative gearing and capital gains tax into effect from 1 January next year.
Negative gearing benefits will be retained for newly built investment properties but not for the purchase of established housing.
Bowen says that all negatively geared investment properties purchased prior to 1 January will be fully grandfathered.
The capital gains tax discount, which is being cut from 50 per cent to 25 per cent, will also take effect from 1 January. Grandfathering arrangements will also apply to the CGT changes.
Bowen, who spoke at a Financial Services Council meeting on Friday, says: “This gives investors adequate time to plan and invest this year before the new rules come into force.”
Bowen also announced that Labor would make changes to the build-to-rent housing arrangements, cutting the managed investment trust withholding rate from its current level of 30 per cent to 15 per cent.
The aim of the policy is to encourage corporate and institutional investment in build-to-rent housing – developments that are owned by companies or funds and leased out. Such arrangements provide greater certainty and stability for long-term renters.
Build-to-rent is big business in the US and other parts of the world but is only a small part of the housing market here. Labor’s view is that current tax arrangements are a disincentive.
Bowen says: “There are currently around 2.7 million renters in Australia. Many of these people have faced the situation where they have tried to create a comfortable home but unexpectedly have been forced to move on when a landlord, for whatever reason, decides to change the arrangements.”
Bowen confirmed that Labor would “gradually” abolish the $450 a month salary threshold before super guarantee payments are made.
“Our lowest paid workers, who are predominantly women, don’t get superannuation,” he says.
Labor will change the law to include a right of superannuation in the National Employment Standards, which will give employees the power to pursue unpaid super through the Fair Work Commission or a court.
Labor will pay superannuation as part of paid parental leave. And it will stick with the legislated timetable for increasing super guarantee contributions to 12 per cent.
Bowen made it clear Labor has no intention of watering down its position on cash refunds for excess franking credits.
“If you started with a blank canvas you would not have excess refundable credits in your tax system. It is a refund of tax to people who are not taxpayers.
“I am a strong supporter of dividend imputation because it gets rid of double taxation. But if we make it refundable when the shareholder does not pay tax, what you are doing is refunding tax paid by the company to them. You are reducing the company tax rate to zero in that case.”