With the election and voting all out of the way (finally) it looks like the proposed drastic changes to negative gearing and capital gains tax are off the table. With 1.2 million negatively-geared property investors in Australia, this is bound to come as welcome news.
However, the fact that negative gearing featured so prominently in the recent election should act as a serious wakeup call for property investors. Once thought of as the sacred cow, negative gearing could easily become an endangered species down the track!
While changes are sitting on the sideline for now, there’s no guarantee this will continue beyond the next election, so how should property investors plan for future changes?
At a minimum, you should be aware of the following:
- Review the current and anticipated performance of every existing property in your portfolio. (You should be doing this every six months anyway.)
- Identify any properties where the impact on cash flows would be severe if negative gearing benefits are reduced or removed.
- Take decisive action to cull any underperforming properties, especially those that rely primarily on negative gearing benefits for their performance.
- Educate yourself on different property investing strategies that do not rely on negative gearing or tax concessions for profitability.
- With the property market showing signs of slowing in many parts of the country, passive strategies like negative gearing and holding for capital growth will only become less effective.
- Educated investors who understand how to read the property market and apply active strategies (such as adding value through renovation, subdivision or development) will be the ones making the real money in the new market conditions.
It’s important now, more than ever, to be in control of your property investment decisions and be proactive.
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