Possible cuts to CGT discount and negative gearing have their advocates, but broking industry boss adds to voices of descent
Outgoing Finance Brokers Association of Australia (FBAA) chief Peter White (pictured) is warning the Labor government against scrapping or reducing the tax benefits made available to Australian property investors.
Speculation is rife that tax reforms are on the agenda leading up to the May Budget, which will be delivered by Treasurer Jim Chalmers on Tuesday, 12 May. While nothing has been confirmed, rumours centre on two cornerstone pieces of Australia’s housing tax policy.
What’s on the table?
The existing capital gains tax (CGT) discount – which reduces the taxable amount of a capital gain on assets held for at least 12 months by 50% – could potentially be reduced to 33% or 25% for property investors. Another option is to remove the discount entirely and revert to a pre-Howard indexation policy.
Chalmers has also confirmed that the government is examining changes to negative gearing, a tax break that allows property investors to offset investment losses against taxable income. Potential changes include restricting negative gearing to new builds, phasing out offsets over time, or limiting the number of negatively geared properties to one or two per taxpayer.
While the government has not committed to any changes ahead of the May Budget, it has signalled a desire to address the imbalance in the Australian housing market, which many believe unfairly favours investors over first-home buyers and renters.
However, White is unconvinced that slashing tax benefits is the solution.
“While I commend the government for wanting to open up more housing, these changes will disadvantage the very people it seeks to help – younger Australians, as well as many other people on lower incomes,” said White.
He continued: “The theory that this will drive down the cost of housing to the extent where someone who can’t currently afford to service a mortgage and enter the property market will suddenly be able to is overly simplistic and ignores the many other factors in loan approval.”
White warned that renters will suffer from lower availability and higher rents if property investors are disincentivised from investing in the Australian property market.
Industry split on who benefits from reform
White’s comments echo the views of much of the housing industry, including the Property Investment Professionals of Australia (PIPA) and the Housing Industry Association (HIA).
“Long-term investors are already leaving the market because they no longer feel it’s financially feasible,” PIPA chair Cate Bakos said. “If that trend accelerates, renters will be the ones who suffer.”
But it is not a universally held opinion.
The Greens contend that the CGT discount is “turbocharging the housing crisis, wealth inequality and intergenerational inequity”. The party – which has the power to influence policy decisions in the Senate – would like to see the CGT discount either abolished or substantially reined in. On negative gearing, The Greens want to see it reduced to just one property per taxpayer.
The NSW Treasury has also indicated that it backs removing or reducing the CGT discount, noting that it cost the government an estimated $23 billion in foregone revenue in the 2024-25 financial year.
The Australian Council of Trade Unions is one of the most vocal proponents for CGT reforms.
“At its worst, the Capital Gains Tax discount is a tax avoidance scheme for the richest Australians that is helping to drive record inequality and is pricing mostly younger people out of home ownership,” the ACTU said in the Greens-backed Select Committee on the Operation of the Capital Gains Tax Discount.
“Rubbing salt into those wounds, the discount is effectively paid for by working people. At its best, the CGT discount is a failed tax policy long in need of an overhaul,” added the union.
Rental affordability plummets
Whichever side you land on the debate, it is clear that housing shortages are harming younger Australians’ home buying ambitions.
Rental affordability fell to new lows in the March 2026 quarter, with Australian tenants allocating a record portion of household income to rent. This is severely curtailing their ability to save up for a deposit without government assistance or the bank of Mum and Dad. Concurrently, property investors currently comprise a 10-year-high share of new mortgage demand (41%). Proponents of tax reform point to this as proof of the market’s inherent unfairness.
Labor will be mulling the political expediency of implementing perceivably egalitarian housing tax policies – by courting votes with first-home buyers, the party could disgruntle the millons of Australians whose wealth is tied up in property investments.
The debate is expected to become even hotter as the May Budget approaches.
