Financial System Inquiry Report: Whats it all about?
There has been a lot of media coverage lately about changes to tax coming from the Financial System Inquiry Report, including getting rid of negative gearing, and I’ve received a lot of enquiry around “what is the start date for these rules”?
So, what is the Financial System Inquiry Report? It is a Report commissioned by the Government to review the financial system as a whole, and to make recommendations on ways this system can be improved.
The Report has been handed over to the Government, and they have released it publically, which has led to the widespread media coverage over the past week.
It is important to note that the changes to tax that have been included in the Financial Services Inquiry Report (“the Report”) are only proposed or recommended changes.
The intention of the Government is to go through a consultation process with respect to the Report’s recommendations. Once it has been decided which recommendations they would like to implement, then legislation will need to be drafted and it will need to go through the Parliament. Therefore, it could be a while before we see any changes!
As you mentioned, one of the key proposed changes is to remove negative gearing. It has been discussed for years that the ability to use losses from rental properties against employment or business income is a very generous tax concession. More recently, it has been suggested that negative gearing is driving up house prices.
Another key proposed change would be to reduce or eliminate some of the concessions available with respect to capital gains. Individuals are eligible to reduce their capital gains tax bill by half if they have owned the asset for at least 12 months prior to selling. For business taxpayers there are a range of concessions available upon sale of an asset or business.
The recommendations raised above are just some of those recommended in the report.
Until the consultation period is over and the Government announces which recommendations they would like to adopt, there really isn’t much that can be done but wait.
Importantly, just because the Government would like to implement a particular recommendation, doesn’t mean they will be able to get the recommendation through the Parliament.