Labor Introduces Bill to Overhaul Negative Gearing, Capital Gains Tax

Everyday property investors and renters are facing a fundamental shift in their financial planning, following the formal introduction of Labor’s negative gearing and capital gains tax changes to parliament.

While Treasurer Jim Chalmers presented the legislation on May 28 as a tool to fix long-standing distortions in the housing market, the changes will be felt most acutely by suburban Australians.

For the estimated two million individuals who hold a property investment, 75 percent of whom own a single dwelling, the laws will end tax concessions for established homes, altering long-term wealth and retirement strategies that have underpinned the Australian property market for decades.

“This is all about removing the distortions in the system that have warped our housing market and coincided with decades of low productivity growth,” Chalmers said.

How the CGT Changes Work

Under current tax laws, investors who hold an asset for more than a year receive a 50 percent discount on capital gains tax when they sell.

Under the proposed changes, that discount will be replaced by an inflation-based adjusted model for any gains made after July 1, 2027.

Existing investments will be grandfathered under transitional arrangements.

For everyday Australians selling assets like property and shares, the new model will adjust the original purchase price to reflect inflation before any tax is calculated, with a minimum 30 percent tax rate applying to the remaining profit.

However, the legislation offers flexibility for those buying newly built homes, allowing individuals to choose between the existing discount system and the new inflation-based model.

Negative Gearing Tightened to New Builds Only

The legislation also significantly narrows negative gearing concessions, which allows investors to offset rental losses against taxable income.

From the 2027-28 financial year, investors will only be able to negatively gear newly built residential properties.

Commercial property, shares, superannuation funds, or widely held trusts will not be affected. Build-to-rent developments and social and affordable housing projects will also remain exempt.

Existing investments purchased before Budget night on May 12, 2026 would continue under current arrangements until sold.

The government said existing CGT concessions for small businesses would remain in place.

These changes fund the Working Australians Tax Offset, which offers a $250 a year tax offset for 13 million workers from 2027–28, and allow workers to claim up to $1,000 in work-related tax deductions without receipts.

Coalition, Hanson Push Back

Opposition Leader Angus Taylor said the Coalition had not yet fully examined the legislation but would work with other parties to oppose it.

“We’re having discussions with anyone who will work with us to fight these toxic taxes,” he said.

One Nation Pauline Hanson said her party supports allowing negative gearing on up to two investment properties, but opposed the government’s broader restrictions, arguing they would disadvantage younger Australians and reduce housing investment.

“There are about 2 million property investors in Australia; about 75 percent of them own only one investment property and another 19 percent own two,” Hanson said.

She argued Labor’s changes to negative gearing and the CGT discount would disadvantage younger Australians trying to enter the housing market.

“Albanese will be able to negatively gear his existing property forever, young people won’t. Labor wants Australians to be dependent on government, not independent of it.”