The Australian Labor Party has reached an agreement with the Greens to implement significant reforms to capital gains tax and negative gearing, marking a major shift in housing policy. The deal, announced on Tuesday, will see changes take effect from July 2026, targeting new investments only and protecting existing arrangements.
Key Reforms and Timeline
Under the agreement, the capital gains tax discount will be reduced from 50% to 25% for new investments, while negative gearing will be limited to new properties. These changes are expected to generate approximately A$3 billion in additional revenue over the next four years, according to Treasury estimates. The Greens secured a commitment from Labor to introduce legislation within the first 100 days of a new parliament.
Impact on Housing Market
The reforms aim to curb speculative investment and make housing more affordable for first-home buyers. According to the Grattan Institute, the changes could reduce property prices by up to 2% and lower rents by 1% over the medium term. However, the Real Estate Institute of Australia warned that restricting negative gearing could deter investment and lead to higher rents in the short term.
Political Response
Greens housing spokesman Max Chandler-Mather said the deal was “a historic step towards fixing the housing crisis.” He added, “For too long, generous tax breaks have fueled property speculation while renters and young people have been locked out of the market.” Labor Treasurer Jim Chalmers described the reforms as “sensible and targeted,” emphasizing that they would not affect existing investors.
The Coalition has criticized the deal, with shadow treasurer Angus Taylor calling it “a tax on Australian families” that would worsen housing affordability. The Property Council of Australia expressed concern about the potential impact on investment, urging the government to monitor the effects closely.
Implementation Details
The new rules will apply to properties purchased after July 1, 2026. Existing investments will remain under the current tax arrangements. The government plans to consult with industry stakeholders before drafting legislation. The Greens have also secured a commitment for a review of the reforms after three years to assess their effectiveness.
