The Australian government is exploring potential restrictions on negative gearing, possibly limiting investors to two rental properties each. This move comes as the Albanese government seeks to address rising pressures for budget savings and increased revenue ahead of the federal budget scheduled for May 2026. According to government sources, Treasury has been tasked with modelling these changes.
Health Minister Mark Butler refrained from commenting on the seriousness of the proposed reform. However, he emphasized the government’s commitment to creating a fairer housing market for younger Australians. “As we head into the 10 weeks leading into the budget, there’s a veritable tsunami of articles speculating about what we might or might not be considering,” Butler stated during an appearance on Sunrise alongside Opposition Deputy Leader Jane Hume. He reiterated the government’s stance on tax and housing policies while acknowledging the challenges faced by young people trying to enter the housing market.
Negative gearing allows property investors to deduct losses from rental properties, such as interest and maintenance costs, from their taxable income. This practice has been under scrutiny, particularly as the government contemplates reforms that could also include adjustments to the capital gains tax discount. Currently, investors can sell properties and only pay tax on 50 percent of the profit if they have held the property for at least one year. Notably, the family home remains exempt from capital gains tax.
Historically, the Labor party moved away from altering negative gearing and capital gains tax after facing defeats in the 2016 and 2019 elections. However, with worsening housing affordability, renewed calls for budget improvements have prompted Treasurer Jim Chalmers to consider reforming these policies as part of his agenda to boost productivity.
Opposition Raises Concerns Over Proposed Changes
In an interview with 2GB, Opposition Leader Angus Taylor expressed skepticism about the government’s plans. He described it as “highly unlikely” that the Coalition would support changes to negative gearing, accusing the Labor government of targeting the financial security of working Australians. “They’re coming after people who have invested over a period of time, often tradies, nurses, all sorts, who have bought investment properties as their nest egg for their future,” he asserted.
Jane Hume echoed Taylor’s sentiments, arguing that increased taxation on landlords would lead to higher rents. She challenged the notion that limiting negative gearing could enhance housing supply for first-time buyers, suggesting that the solution lies in increasing the construction of new homes. “We all know that supply is the problem in housing. It’s not how much you’re taxed,” Hume noted.
Recent data from the Australian Tax Office indicates that during the 2021-22 period, approximately 1.3 million individuals were positively or neutrally geared, while about 950,000 were negatively geared. Estimates from the Greens regarding the 2024-25 budget indicated that revenue losses from negative gearing could reach around $6.9 billion, with capital gains tax discounts on residential properties costing an estimated $5.4 billion.
While proponents argue that negative gearing fosters investment in housing and helps alleviate rental pressures, critics highlight that the benefits disproportionately favour wealthier Australians and contribute to rising property prices.
As discussions continue, the future of negative gearing and its impact on the Australian housing market remains a contentious issue. The government’s final decisions will be closely watched as the May budget approaches.
