The federal government has unveiled a sweeping overhaul of property taxes, targeting investors with changes to negative gearing and capital gains tax discounts. The reforms, announced by Treasurer Jim Chalmers, aim to save the budget $3.2 billion over four years and $11.6 billion over a decade.
Key Changes to Negative Gearing
From July 1, 2025, negative gearing will be limited to new properties only. Existing investments will be grandfathered, meaning current investors can continue to claim deductions on existing properties. The change is expected to affect about 1.1 million taxpayers who currently use negative gearing.
Capital Gains Tax Discount Halved
The capital gains tax discount for assets held longer than 12 months will be reduced from 50% to 25%. This applies to all assets, including property and shares, but excludes small business assets and superannuation funds. The measure is projected to raise $2.4 billion over four years.
Impact on Investors
According to the Treasury, the changes will reduce investor demand for established properties, potentially slowing house price growth. However, critics argue it could lead to higher rents. "This is a balanced package that makes the system fairer," Chalmers said. The Property Council of Australia warned the changes could deter investment in housing supply.
Housing Supply Measures
Alongside tax changes, the government announced a $10 billion Housing Australia Future Fund to build 30,000 social and affordable homes over five years. An additional $500 million will be allocated for infrastructure to support new housing developments.
Reaction from Stakeholders
The Australian Greens welcomed the reforms but called for stronger rent controls. The Coalition opposed the changes, arguing they would hurt mum-and-dad investors. "This is a tax on aspiration," said Shadow Treasurer Angus Taylor. The Real Estate Institute of Australia predicted a short-term dip in investor activity but said the long-term effects remain unclear.
