The Federal Government will introduce legislation to reduce the tax benefits of capital-protected loans used by investors to buy shares without risking losses.
The change will apply retrospectively to all capital-protected products used to buy shares, managed funds and stapled securities purchased after April 15. Investments made before the deadline will not be affected and remain subject to specific product rulings previously made by the Tax Office.
The change means that the cost of protection, which averages 20 per cent of the total interest costs, will no longer be tax-deductible.
The announcement comes just as the end-of-tax-year investment season is about to begin in earnest. The release of new tax-effective protected-equity loan and instalment warrant products is expected before June 30.
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