The proposal has two components.

Component 1 – Remove negative gearing

• This component would remove negative gearing arrangements (which allow deductions for investment losses to be made against non-investment income) for all non-business investment assets held by individuals, superannuation funds, partnerships, trusts and companies, but allow these taxpayers to negatively gear non-business-related investments in the construction and purchase of new dwellings.
  • In removing negative gearing any investment losses could still be used to offset any investment gains in the same financial year, regardless of asset class.
  • Within-year non-business investment losses could be accumulated and used to offset any future capital gain made on these assets.

Component 2 – Halve the capital gains tax discount

• This component would change the capital gains tax discount for individuals, partnerships and trusts from 50 per cent after a 12-month holding period to 25 per cent after a 12-month holding period.
  • There would be no changes to the existing capital gains tax discount that applies to superannuation funds, or to the 50 per cent active asset reduction concession that applies to small business.

The proposal would have effect from 1 January 2020. The proposal would only apply to assets purchased or investments made on or after the date of implementation.