Albanese government considers capping tax breaks for property investors
Updated ,first published
While the government is trying to limit the application to two rental properties each, investors may face restrictions on the number of homes they can negatively impact.
Amid growing pressure to find savings and raise revenue ahead of the federal budget in May, the Albanian government has asked the Treasury to model changes to negative gearing rules, government sources confirmed on this blog.
Health Minister Mark Butler did not comment on how seriously the reform was being considered but did not rule it out, saying only that the government was committed to leveling the playing field for young Australians.
“As we head towards the 10 weeks leading up to the budget, there is a real tsunami of articles speculating about what we will and won’t consider,” he said, alongside Deputy Opposition Leader Jane Hume. Sunrise Friday morning.
“We’ve been very clear about our tax policies. We’ve been very clear about our housing policies… but we’ve also been clear that we think there’s a problem with young Australians entering the housing system.”
Negative gearing allows an investor to reduce the amount of tax he pays by deducting from his annual income any losses incurred from operating a property (such as interest, rates and maintenance).
The policy change is being considered alongside changes to capital gains tax relief, which allows investors to sell a property and pay tax on just 50 per cent of the profit if they have owned the property for at least a year. The family home is currently exempt from capital gains tax.
Labor has moved away from negative gearing and changes to capital gains tax after reforming those cuts, which were defeated in the 2016 and 2019 elections.
However, as housing affordability worsens, the government faces new pressure to improve the profitability of the budget and Chancellor of the Exchequer Jim Chalmers makes productivity-boosting reform the focus of his agenda, policies such as rolling back capital gains tax cuts and negative gearing are being reconsidered.
The government’s preferred change is for capital gains tax relief, but the Treasury will consider restrictions on negative gearing after advising on the likely impact of these policies.
In an interview with 2GB on Friday morning, Opposition Leader Angus Taylor accused Labor of going after Australians’ money and said it was “pretty unlikely” the Coalition would support changes to negative gearing.
“They go after people who invest over a period of time, mostly tradesmen, nurses and all kinds of people, who buy investment properties for their future and help bring more homes to our country in the process,” he said.
“If I am a landlord and you tax me more, I will raise the rents,” Hume said.
Asked about the argument that limiting negative gearing – an incentive that allows investors to offset property costs against income – would free up housing supply for first home buyers, Hume said the answer was to increase supply by building more homes.
“We all know the problem with housing is supply. It’s not about how much you’re taxed. And all this… flying a kite around this tax and this tax – this is just Labor paving the way to increase taxes on Australians,” he said.
Australian Taxation Office figures show 1.3 million people were positively or neutrally referred (meaning they received more or equal rental income compared to their costs) in 2021-22, while 950,000 people were negatively referred.
Costs requested by the Greens from the Parliamentary Budget Office in 2024 showed that income lost from negative gearing was estimated to cost around $6.9 billion in 2024-25, while capital gains deductions on residential properties were estimated to cost $5.4 billion.
While some argue the downturn encourages housing investment, helps increase supply and puts downward pressure on rents and house prices, others argue the benefits flow disproportionately to wealthier Australians, pushing up property prices.
Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up for our weekly Inside Politics newsletter.
Millie Muroi is the economics writer for The Sydney Morning Herald and The Age. He was previously an economics correspondent for the Canberra Press Gallery and a banking writer in Sydney.Connect with: X or email.
Brittany Busch is the federal politics correspondent for The Age and the Sydney Morning Herald.Connect via email.
