The Australian federal government is reforming negative gearing and capital gains tax concessions in a bid to help more Australians own their own homes.
Announced in the 2026-2027 Federal Budget, the government will replace the 50 per cent Capital Gains Tax (CGT) discount with a discount based on inflation and introduce a minimum 30 per cent tax on gains from July 1, 2027.
This reform means that investors will only pay tax on their real capital gain, restoring the original intent of the CGT arrangements.
The CGT reforms will only apply to gains arising after July 1, 2027. Investors in new builds will be able to choose the 50 per cent CGT discount or the new arrangements.
The move, designed to level the playing field for first home buyers, aims to support an additional 75,000 homeowners over the next decade.
Beyond tax reform, the Budget commits AU$2 billion to a new Local Infrastructure Fund.
This housing-enabling investment will help councils and utilities build the essential roads, sewerage, and water connections required to unlock up to 65,000 new homes. It brings the government’s total investment in housing‑enabling infrastructure to $6.3 billion.
To further protect domestic buyers, the government is extending the ban on foreign investors purchasing established dwellings until mid-2029.
“Australia’s longstanding housing shortage is making homes unaffordable,” said Treasure Jim Chalmers in a speech to Parliament.
“We’re levelling the playing field for first home buyers with 5 per cent deposits and tax reform to help more young Australians into their own home.”
The government is investing AU$59.4 million to help Community Housing Providers provide social housing for over 4,000 young people aged 16–24 who are at risk of or experiencing homelessness.
The Budget also releases AU$100 million for First Nations housing in remote areas.
While the funding was welcomed, the Australian Constructors Association (ACA) warned that money alone won’t solve the crisis.
ACA Chief Executive Peter Colacino pointed out that the focus needs to remain on reform to support the productivity of the sector, allowing the ambitious agenda to be fulfilled.
“If we don’t fix the system, new spending will be consumed by inefficiency entrenching unaffordability instead of new assets for communities.”
The ACA is calling on the government to use the funding as a lever for fairer risk sharing and more efficient planning to ensure projects are delivered faster and cheaper.
The real estate sector has reacted negatively to the CGT and negative-gearing changes.
The Real Estate Buyers Agent Association of Australia (REBAA) said the changes have already fractured buyer confidence and raised investor concerns about future rental supply.
REBAA President Melinda Jennison reported that investor frustration is rising sharply.
“If these changes discourage investment, fewer rental homes will be added to the market, and that will push rents higher. Tenants will feel the impact long before the broader market adjusts.”
Despite the initial shock, REBAA noted that seasoned investors are already looking past the headlines.
“Over the past 50 years, tax laws, policies and lending practices have changed countless times, alongside numerous market cycles, yet quality property in well-selected locations has consistently performed well over time.”
For those still priced out of the market, the Budget continues to fund Commonwealth Rent Assistance, supporting 1.4 million Australians.
The government also reaffirmed its commitment to the ‘A Better Deal for Renters’ initiative, working with states to harmonise and strengthen tenants’ rights across the country.
