The Australian Federal Government is expected to release its federal budget next week, with plans to adjust several tax settings related to property and investment, including tightening negative gearing and reforming the capital gains tax (CGT) discount.
The government says the reforms aim to improve housing affordability and address intergenerational inequality. Prime Minister Anthony Albanese has noted that many young Australians feel they are unable to compete fairly with previous generations when it comes to home ownership, making housing tax reform a central focus of the upcoming budget.
Reports suggest that negative gearing may be subject to a “grandfathering” arrangement, meaning the changes would only apply to newly purchased investment properties. The CGT discount could also be shifted toward an inflation-indexed calculation method, reducing the current fixed 50 per cent tax concession.
However, industry groups and economists have warned that tightening both negative gearing and CGT concessions at the same time could reduce investor incentives in the rental market, slow new housing supply, and ultimately push up rents. Some modelling estimates suggest rents could rise by around 2.4 per cent by 2029–30. Others argue that rent increases may be gradual rather than sharp, as policy changes take time to flow through the market, and rental leases typically run for 6 to 12 months, limiting short-term impact.
At the same time, economists are also concerned about potential impacts on startups. Tech sector stakeholders warn that reducing the CGT discount or changing its calculation could increase tax burdens on founders and employee share schemes, weakening startups’ ability to attract and retain talent, and potentially driving skilled workers and entrepreneurs overseas—damaging Australia’s innovation ecosystem in the long term.
Commentary:
In theory, reducing negative gearing and CGT concessions may lower the attractiveness of property investment, leading some investors to exit the market and slowing house price growth, which could appear beneficial for first-home buyers. However, this does not directly translate into improved housing affordability.
Investor withdrawal does not immediately increase housing supply, and it may even reduce new construction if development incentives weaken. At the same time, housing affordability is not determined solely by property prices, but also by interest rates, income growth, and credit conditions. Even if house price growth slows, high interest rates or tighter lending conditions can still keep entry barriers to home ownership elevated.