Bold take: the housing market debate just got louder as negative gearing reform rumors surface ahead of the May budget. The Albanese government is once again signaling openness to changes that could reshape how investors deduct losses from rental properties, potentially reshaping the tax landscape and addressing housing pressures.
Finance Minister Jim Chalmers confirmed that Treasury is examining options in the lead-up to the budget, including a proposal to limit negative gearing to two investment properties. At the same time, the government is weighing possible reductions to the 50% capital gains tax discount, signaling a broader shake-up of policies that have long encouraged housing as a wealth-building tool for higher-income Australians.
What negative gearing does is simple: investors may subtract rental losses from their other income, lowering their overall tax bill. There is, however, no cap on how many properties can be negatively geared.
Chalmers noted that Treasury’s evaluation of these options ahead of the budget isn’t unusual and stressed that no decision has been made yet. He emphasized that the government is focused on intergenerational issues in housing and tax, and is pursuing additional measures to address fairness—such as cutting income taxes, making superannuation fairer, boosting the low-income super tax offset, increasing housing supply, and helping people save for deposits. Any moves beyond current plans would go through the cabinet in the standard process.
Two government sources confirmed that negative gearing is under review but downplayed reports about a two-property cap, saying deliberations are at an early stage.
Historically, Labor has flirted with changes to negative gearing and the capital gains discount, pushing those ideas at times of electoral campaigns. The party shelved these policies ahead of the 2022 election after attempts in 2016 and 2019. Treasury did model changes to negative gearing in 2024, but the government chose not to pursue them before the 2025 election, opting instead to focus on boosting housing supply.
Pressure to revisit the policy has grown, including within Labor circles, fueling expectations that the May budget could introduce reforms.
Opposition leader Angus Taylor argued that it’s unlikely the Coalition would back winding back negative gearing or the capital gains discount, stressing that the path to more housing should not hinge on new taxes. “We need more houses, and slapping another housing tax won’t achieve that,” he told 2GB. A former Liberal colleague recently suggested rethinking negative gearing as part of a strategy to appeal to first-time buyers.
The Greens welcomed the possibility of changes, arguing that tax concessions inflate housing costs and funnel billions to wealthy investors. Green housing spokesperson Barbara Pocock called ending these discounts a step toward making housing more affordable and fair, noting that current policies let affluent investors outbid ordinary buyers, including first-home buyers and younger people.
If these reforms advance, they could redefine who benefits from housing investments and influence the pace of new home construction, mortgage access, and price dynamics. What’s your view: should policy prioritize broader housing supply and fairness, even if it means curbing investment incentives? Or would tighter rules risk slowing investment and construction? Share your thoughts in the comments.
