Australia Announces Major Property Tax Reforms

The Australian government has introduced significant property tax reforms as part of the May 12, 2026, federal budget, aimed at increasing housing affordability and assisting first-home buyers.

Government modelling suggests that changes to negative gearing and capital gains tax (CGT) will help an estimated 75,000 Australians purchase their first home over the next 10 years. The reforms are intended to move 75,000 properties from investors to owner-occupiers, slow the growth of house prices, and eventually reduce rental costs.

Prime Minister Anthony Albanese stated that the measures are intended to help more young Australians purchase their own homes.

"This is about doing the right thing to help more young Australians buy a home of their own," Albanese said.

The reforms target long-standing tax advantages used by property investors to maximize profits and offset losses.

Effective from the evening of May 12, 2026, restrictions on negative gearing mean that only purchases of newly built investment properties will be eligible to have losses deducted from a person’s income tax. Finance Minister Katy Gallagher noted that these changes are aimed at "essentially making negative gearing less attractive."

Additional changes to the tax system include a minimum 30 per cent tax rate imposed on profits from assets and family trusts to close existing loopholes. The discount on capital gains tax will be amended to only discount inflation from the tax owed; these CGT changes are scheduled to take effect in July 2027.

Treasury forecasts indicate a mixed impact on housing supply. The tax reforms are expected to result in approximately 35,000 fewer homes being built. However, the government has introduced other taxpayer-funded measures to boost supply, which are projected to result in an overall increase in housing stock of about 30,000 homes.

The announcement has led to accusations from the Coalition that the government has broken election promises. Senator Gallagher acknowledged that the decision would require explanation, stating that governments must make decisions.

The strategy adopted by Prime Minister Albanese and Treasurer Jim Chalmers has been characterized as a “seek forgiveness, not permission” approach, as the government did not take these specific tax changes to an election. This mirrors a political tactic previously used by former Prime Minister Tony Abbott.

The current reforms follow a history of failed attempts to unwind the combination of negative gearing and CGT discounts. In 2019, Bill Shorten proposed wide-ranging tax reforms during an election campaign, which contributed to Labor’s defeat. The 2026 budget represents the first significant shift in these property tax perks in several years, shifting the tax burden away from workers and toward wealthy investors and trust structures.