Why Chalmers will rein in the property free-for-all in the federal budget

Australia’s Albanese government will introduce major tax reforms in tonight’s federal budget, targeting negative gearing and the capital gains tax (CGT) discount to address housing affordability. Despite ruling out such changes at the last election, the government cites growing public pressure, as soaring property prices have made homeownership nearly impossible for younger Australians without family financial support. Negative gearing, which allows investors to deduct losses from rental properties against other income, will be restricted. Current data shows only 23% of negatively geared investors purchase new homes, while the majority buy existing properties, worsening affordability for first-time buyers. The Parliamentary Budget Office found that 80% of CGT discount benefits and 60% of negative gearing advantages go to the top 10% and 20% of earners, respectively. The reforms echo past attempts by former Prime Minister Paul Keating, who abolished negative gearing in 1985 before reversing the decision due to industry backlash. Critics argue the current system treats housing as an investment vehicle rather than a basic need, exacerbating wealth inequality. Economist Saul Eslake notes that negative gearing does not increase housing supply, as most investors buy established properties, further driving up prices. The budget aims to shift the burden from first-home buyers to high-income investors, who have disproportionately benefited from existing tax policies. With property prices remaining out of reach for many, the government hopes these changes will ease the financial strain on younger generations and reduce the reliance on parental assistance for home deposits.