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• Australia’s Labor government is expected to introduce a one-year transition period for proposed changes to capital gains tax discounts and negative gearing rules in the upcoming federal budget.
• The government plans to remove the 50% capital gains tax discount on assets held for over a year from July next year, while allowing temporary relief for investments made after the budget announcement until mid-2027.
• Negative gearing benefits are likely to remain for existing investors under grandfathering provisions, while only newly built homes may qualify for the tax benefit in the future to support housing supply and affordability.
Australia’s centre-left Labor government is expected to provide a one-year grace period for proposed changes to capital gains tax discounts and negative gearing rules in the upcoming federal budget, according to a report by the Australian Financial Review. Advertisement
The proposed reforms are part of wider efforts to address housing affordability and improve access for first-time and younger homebuyers, amid growing concerns over intergenerational inequality in the country’s property market.
As per the report, which cited people familiar with the budget discussions, the government plans to remove the existing 50% capital gains tax discount on assets held for more than one year from July next year. The policy would return to the pre-1999 system where only inflation-adjusted gains are taxed.
However, the transition arrangement is expected to allow assets purchased after the budget announcement to continue receiving the 50% tax discount until mid-2027. This is aimed at giving investors and markets time to adjust to the new framework.
The government is also expected to make significant changes to negative gearing rules. Under the proposed structure, landlords with already negatively geared properties are likely to retain existing benefits under grandfathering provisions. At the same time, only newly built homes would qualify for negative gearing going forward.
The report further stated that existing properties purchased after budget night could still be negatively geared until July 2027, after which the benefit would no longer apply to such assets.
Negative gearing and capital gains tax concessions have remained politically sensitive issues in Australia for several years. The policies have often been criticised by housing advocates and economists, who argue that they encourage speculative investment activity and push housing prices higher, making home ownership difficult for younger Australians.
Similar reforms proposed by the Labor Party ahead of the 2019 national election had faced strong opposition and were widely viewed as one of the factors behind the party’s defeat at the time.
The political environment, however, has shifted since then. Prime Minister Anthony Albanese secured a major election victory last year, strengthening the government’s position to revisit structural housing and tax reforms.
Australia has continued to face housing supply shortages, rising rental costs and affordability pressure across major cities including Sydney and Melbourne. Over the past few years, policymakers and industry experts have repeatedly called for measures that can improve housing accessibility while supporting new residential construction.
The proposed move to allow negative gearing only for newly built homes is also expected to support fresh housing supply by directing investor demand towards new developments rather than existing housing stock.
Source Reuters
5th Jun, 2025
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