Malcolm Turnbull (Wentworth, Liberal Party, Prime Minister) Share this | Hansard source

Let me detail the Labor Party's policy that the honourable member seeks to defend. The Labor Party's policy makes it clear that Labor will limit negative gearing to new housing from 1 July 2017, and investments made before this date will not be affected and will be grandfathered. It defines negative gearing as the situations where investors make an investment, mostly in property, that loses money in the short term in the expectation of making gains in the future, and the investor can deduct any losses associated with the investment from their salary and wage income.

The assumption, I think, that honourable members and, clearly, the public had made was that, when Labor said they will limit negative gearing to new housing, they meant new housing as distinct from established housing. But it is clear that the Labor Party's proposal is to outlaw negative gearing from new investments in any other asset classes apart from new housing. Indeed, only today the shadow Treasurer said in his critique of the BIS report: 'They say that investment will be sucked out of property because you'll still be able to invest and negatively gear in shares and other assets. That's just wrong—wrong, in fact.' He said: 'Labor's policy is clear. You will be able to gear into new real properties but not into the asset classes which they are saying you can under Labor's policy.'

What this means is that, under the cover of a policy document that refers to housing affordability, you have an extraordinary restriction on Australians' ability to invest. Negative gearing is just income tax 101: the interest on a loan incurred to buy an income-producing asset can be offset against other income. That is basic income tax principles. What this document does is restrict the ability of every Australian to invest in any other asset class apart from new residential property and claim a net loss against their other income. So no more business partnerships unless you want to run the risk of paying for the losses out of after-tax income; no more investing in businesses or in setting up a company. It might be a couple of tradesmen or tradeswomen setting up a company. They will not be able to do that because, if they borrow money to buy the shares and they do not get enough dividends to offset the interest, they will not be able to deduct against income. This is an extraordinary assault on economic freedom. (Time expired)

Mr Pyne interjecting—

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