The Australian government has announced a major overhaul of housing tax policies, targeting affordability for first-time buyers. The reforms, unveiled by Treasurer Jim Chalmers, include changes to capital gains tax and negative gearing, sparking debate across the political spectrum.
Key Changes to Capital Gains Tax
The government plans to reduce the capital gains tax discount from 50% to 25% for investment properties held for more than 12 months. This move is expected to generate billions in revenue over the next four years, which will be redirected into housing affordability initiatives.
Impact on Investors
Property investors are likely to face higher tax bills under the new rules. The discount reduction applies to all investment properties, not just new homes, potentially cooling investor demand. Industry groups have expressed concerns about reduced rental supply and higher rents.
Negative Gearing Reforms
Negative gearing will be limited to new properties only, meaning investors can no longer claim losses on existing homes against their taxable income. This change aims to encourage investment in new housing supply rather than existing stock.
Support for First-Home Buyers
The government will introduce a new shared equity scheme, allowing first-home buyers to purchase a home with as little as 2% deposit. The scheme targets low- and middle-income earners, with the government contributing up to 30% of the purchase price in exchange for a stake in the property.
Reactions and Analysis
Housing advocates have welcomed the reforms, arguing they will help address the housing crisis. However, economists are divided, with some warning of unintended consequences such as reduced rental supply and increased rents. The opposition has criticised the plan, labelling it a tax grab that will hurt mums and dad investors.
The reforms are set to be legislated later this year, with implementation expected from July 2026. The government has pledged to monitor the impact on housing supply and affordability closely.
