Australia’s housing affordability challenge continues to dominate policy discussions, with increasing attention on how tax settings may be influencing the property market.
Under current rules, individuals holding an investment asset for more than 12 months may benefit from a 50% Capital Gains Tax (CGT) discount upon sale. However, there is growing debate around whether concessions such as CGT discounts and negative gearing are contributing to stronger investor demand—and, in turn, higher property prices. Organisations including the Organisation for Economic Co-operation and Development have previously recommended that Australia review these settings.
While no formal legislation has been introduced, Treasury is reportedly modelling several “high-impact” reforms ahead of the upcoming Federal Budget, including:
- Limiting Negative Gearing (“2-Property Cap”)
A proposal to cap the number of properties for which rental losses can be offset against salary income to two per individual. Losses from additional properties may be “quarantined” and only applied against future income or gains from those assets. - Reducing the CGT Discount
There is mounting pressure to reduce the CGT discount from 50% to 25%, with some alternative proposals suggesting a 33% rate to better align with superannuation tax treatment. - Grandfathering Arrangements
To minimise market disruption, any changes are likely to apply only to newly acquired assets from a future “line in the sand” date (potentially 1 July 2026).
A Different Perspective: Supply-Side Solutions
Industry groups such as the Housing Industry Association argue that the core issue is not tax policy, but housing supply constraints—driven by limited land releases, planning delays, infrastructure costs, and rising construction expenses.
Instead of reducing investor incentives, the HIA has proposed accelerated depreciation for new housing developments.
Currently, residential buildings are depreciated over 40 years (2.5% per annum). The proposal suggests shortening this period significantly—potentially to 5–10 years—effectively bringing forward tax deductions.
The intended policy impact:
Accelerated deductions → Improved cash flow → Stronger project viability → Increased housing supply
At this stage, these ideas remain under discussion and have not been legislated.
Conclusion
Regardless of the final policy direction, one thing is clear:
Housing-related tax reform is likely to be a major focus in Australia in the years ahead.
Potential changes to CGT concessions, negative gearing, or the introduction of accelerated depreciation could materially impact investment returns, ownership structures, and long-term tax planning strategies.
We will continue to monitor developments closely and provide structured insights, including scenario modelling, to help clients stay ahead.
If you would like to review your investment structure or assess potential impacts under different policy scenarios, please feel free to contact our team.
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