Full Breakdown
Labor Government Considers Changes to Negative Gearing Ahead of May Budget
2/27/2026, 9:16:05 AM
Overview of Proposed Changes
The Albanese government is contemplating reforms to negative gearing as part of a broader strategy to address the housing crisis and improve the federal budget deficit. Treasurer Jim Chalmers confirmed that the Treasury is modeling potential changes, including a proposal to limit negative gearing to two investment properties per investor. Currently, there are no restrictions on the number of properties that can be negatively geared, allowing investors to deduct losses from their taxable income.
Historical Context of Negative Gearing
Negative gearing has been a feature of Australian tax law since 1936, designed to encourage investment in housing. It allows property investors to claim tax deductions on losses incurred from rental properties. The capital gains tax (CGT) discount, introduced in 1999, permits investors to pay tax on only half of the profit from properties held for over a year. Both policies have been criticized for contributing to rising housing prices and exacerbating affordability issues.
Economic Implications and Revenue Considerations
The Parliamentary Budget Office estimates that negative gearing and the CGT discount will cost the government approximately $176 billion over the next decade. In the 2024-25 financial year, the revenue lost from negative gearing is projected to be around $6.9 billion. Economists and some Labor party members are advocating for reforms to make the housing market fairer and to increase government revenue.
Political Reactions and Opposition
The proposal has sparked varied reactions across the political spectrum. Opposition Leader Angus Taylor has labeled the changes as detrimental, asserting that they would not lead to an increase in housing supply and would instead harm investors. He emphasized that the Coalition would likely oppose any rollback of negative gearing or CGT discounts. Conversely, the Greens have welcomed the discussions, arguing that such reforms would alleviate housing costs for the general population.
Former Liberal MP Keith Wolahan suggested that the Liberal Party should consider supporting changes to negative gearing to appeal to first-time homebuyers. He proposed capping negative gearing for established properties while allowing deductions for newly constructed homes.
Official Statements & Responses
Chalmers has stated, “We know that there is a sense of intergenerational unfairness in the tax system and in the housing market as well,” while emphasizing that no decisions have been finalized. He noted that the Treasury regularly explores various options leading up to the budget. Health Minister Mark Butler echoed this sentiment, indicating that discussions are ongoing but no formal policy has been established.
Conflicting Reports & Gaps
While government sources confirm that negative gearing is under review, they downplay the extent of the discussions, suggesting that no immediate decisions are forthcoming. This contrasts with the Greens' firm stance that they will not support Labor's housing package unless significant reforms to negative gearing and CGT are implemented.
What's Next
As the May budget approaches, the Albanese government faces pressure to balance housing affordability with fiscal responsibility. The outcome of these discussions will significantly impact both the housing market and the government's financial strategy. The potential reforms to negative gearing and CGT are expected to be key topics in the upcoming budget deliberations.
