After reaching an agreement with the Greens, Australia’s capital gains tax (CGT) reform and negative gearing adjustments are expected to formally pass the Senate this Thursday. In exchange, the Labor government has agreed to delay and adjust its controversial comprehensive overhaul of the NDIS.
The Labor government will also tighten superannuation loopholes related to property investment in exchange for Greens support. Under the agreement, a long-standing exemption allowing self-managed superannuation funds (SMSFs) to borrow in order to invest in residential property will be terminated, but already-signed transactions will be protected under a “non-retrospective” measure.
Prime Minister Albanese stated that the move aims to reduce intergenerational unfairness in the tax system, and noted that such borrowing accounts for a very small share of total housing loans, but may contribute to asset concentration. However, the superannuation system itself remains unchanged, and people will still be able to invest in property through SMSFs, just without borrowing.
The Greens, meanwhile, criticised the reforms as still insufficient, arguing that the government has failed to properly address housing difficulties faced by young people.
In addition to tax reform, both sides agreed to extend the National Disability Insurance Scheme (NDIS) reform inquiry by eight weeks, pushing the new reporting deadline to August 14. The revised content includes limiting ministers’ power to cut individual support budgets, strengthening transparency in automated decision-making, and adding safeguards for people with disabilities to ensure they are not forced to undergo controversial restrictive measures.
However, the Greens stated they will continue to oppose parts of the NDIS reforms and will work with the disability community to pressure the government for further concessions.
Commentary:
The political agreement between Labor and the Greens trades key tax reforms for progress in the Senate, paving the way for the government to pass its core budget agenda before the winter recess. However, it also highlights Australia’s reliance on transactional politics, where legislation is advanced through issue-based exchanges.
From a policy perspective, reducing negative gearing and capital gains tax concessions will, in theory, reduce the attractiveness of property investment and slow house price growth, which appears to benefit first-home buyers. However, this does not necessarily translate into improved housing affordability. The exit of investors will not immediately release supply, and may instead weaken market liquidity. Developers may also scale back construction due to lower expected returns, limiting new supply. At the same time, housing affordability is not determined solely by house prices, but also by interest rates, income growth, and credit conditions. In a high-interest-rate environment with cost-of-living pressures, even if price growth slows, barriers to entry may remain high.
Therefore, such tax-based policy adjustments mainly reshape market structure rather than directly solving housing affordability, and their actual effectiveness remains highly uncertain.