Each day further exposes Labor’s negative gearing proposal as a rushed and reckless tax grab that will hurt business investment and mum and dad property investors.
Australians have seen the policy-on-the run confusion by Shadow Treasurer Chris Bowen trying to explain if only property investment would be affected by their policy or if all assets would be affected.
Now tax experts are adding to growing concern about the impact of Labor’s rushed and ill-considered negative gearing proposal.
Paul Drum, Senior Tax Counsel at CPA Australia said of Labor’s proposal:
“Small unincorporated businesses would also be a victim of the cutback.” (The Australian, 8 March 2016)
Under Labor’s proposal, a small business owner who wants to borrow to invest in their business could no longer mitigate any short-term losses by using them to offset salary and wage income.
And they would have less ability to borrow since Labor’s policy will dampen house prices, which are often used as the main collateral for a small business loan.
Then we have the question about whether an asset is business related or investment related. According to Chartered Accountant Australia and New Zealand tax leader Michael Croker;
"This sounds like a relatively simple question to resolve in the situation where an individual makes a direct investment but things get complicated where a taxpayer has a mixed portfolio of business, or active, and investment, or passive, assets." (Australian Financial Review, 8 March 2016)
Labor is adding further complexity, red tape and uncertainty to the tax system. Already Australians are some of the highest users of tax experts in the world. Over 73 per cent of Australian taxpayers lodge their tax return through a tax agent or accountant.
Small businesses and individuals don’t need greater complexity in the tax system and our transitioning economy doesn’t need proposals that will discourage investment and hinder growth.
And the questions mount.
Recently Labor’s Shadow Parliamentary Secretary to the Shadow Treasurer, Ed Husic couldn’t answer how a new home would be defined under the proposal;
“Um, you will need to go through all the definitions of what constitutes new, I’m not going to be writing tax law on the show.” (Sky News “To the Point”, 16 February 2016)
These are just some of the serious flaws and unanswered questions starting to emerge with Labor’s negative gearing proposal.
Labor not only failed to think through the consequences of their policy on rents, house prices and mum and dad investors, they also clearly failed to think through the consequences for business.
Labor’s 13-page policy document fails to mention business even once in relation to negative gearing but now it’s a tax on business investment policy as well. If this policy was intended to cover non-residential and commercial investments then why wasn’t that explained?
Such a major change to Australia’s tax system that potentially impacts small businesses and individuals across Australia deserves more than media commentary and ad-hoc statements.
Labor cannot be trusted to manage our successfully transitioning economy. Their rushed policies will hurt investment and discourage enterprise.