Treasurer Jim Chalmers said the 2026 federal budget proposes tightening or eliminating negative-gearing tax breaks and reducing the capital-gains-tax discount.
These changes aim to address a slump in homeownership among younger Australians by curbing tax advantages that primarily benefit wealthy investors. The government said the reforms are necessary to improve social cohesion.
Negative gearing allows investors to offset losses on rental properties against their taxable income. Around 1.1 million investors currently utilize these tax breaks [1]. While some reports suggest the policy is effectively dead in the budget, other analysis indicates the government may focus on tightening the rules rather than a total elimination [2], [3].
The budget also targets the capital-gains-tax (CGT) discount. Currently, assets held for more than 12 months receive a 50 percent discount [4]. This mechanism was introduced 27 years ago by the Howard government to replace indexation [5].
Prime Minister Anthony Albanese said the changes to CGT and negative gearing are required for social cohesion. The move signals a shift in fiscal priority toward first-time buyers who have struggled to enter the property market as investor demand continues to drive up prices.
Critics of the move suggest the changes could disrupt the rental market, while proponents argue that removing the incentives will reduce the number of investment properties, and increase the supply of homes for owner-occupiers. The government said it intends to use the budget to rebalance the tax system to favor residential stability over speculative investment.
“The 2026 federal budget proposes tightening or eliminating negative-gearing tax breaks.”
The proposed reforms represent a significant pivot in Australian housing policy, targeting the structural tax advantages that have historically encouraged property speculation. By reducing the 50 percent CGT discount and limiting negative gearing, the government is attempting to lower the competitive advantage investors have over first-time homebuyers. If implemented, these measures could slow the growth of residential property prices but may also lead to a temporary decrease in rental availability as some investors divest their portfolios.
