What is the ALP proposing?
Labor is proposing to scrap negative gearing on any investments in established property that are made after a yet-to-be-determined date. Existing property investments will be grandfathered. Negative gearing on new-build properties will still be permitted. If you do invest in established property after the yet-to-be-determined date, you will be able to carry forward the income losses and offset them against future property income or capital gain.
The ALP is also proposing to increase the rate of Capital Gains Tax (CGT). Currently, if you own an investment for more than 12 months and make a capital gain on sale, you only pay tax at your your marginal tax rates) on 50% of the net gain. The ALP is proposing to reduce the discount such that the CGT liability will be on 75% of the net capital gain. Again, existing investments will be grandfathered.
If you think Shorten will win, should you invest or not?
Property is a long-term investment. The average capital growth rate since 1980 has been over 8% p.a. Over this time (since 1980), the property market has endured many challenges including double-digit interest rates, the abolition of negative gearing in 1985 (and subsequent re-introduction), the introduction of GST in 2000, wars, rumors of wars, share market crashes and many different governments and Prime Ministers. Despite this, returns have been very healthy and comparable to the share market. I doubt these proposed tax changes by the ALP will have any material impact on investment returns in the long run.
However, if you are concerned about these changes coming into force and would like to invest in property, then it might be wise to do so now before the next federal election, so that your investment will be grandfathered (and you will still enjoy negative gearing and lower CGT).