POLICY ANALYSIS
CGT and Negative Gearing Reform: Where Is Australia Headed?
A plain-English explanation of negative gearing, the CGT discount, reform options, and why landlords should follow the debate closely.
Why reform is being discussed
Negative gearing and the CGT discount have shaped Australian property investment for decades. Supporters say they encourage investment and rental supply. Critics argue they increase investor demand for established homes and make it harder for first home buyers to compete.
What negative gearing means
Negative gearing occurs when deductible property costs exceed rental income. Under traditional settings, investors could offset that net loss against other income, such as wages.
What the CGT discount means
For assets held more than 12 months, individuals have generally been able to discount a capital gain by 50 per cent before tax is calculated. This has been a major part of long-term property investment planning.
Reform options
- Limit negative gearing to new residential construction.
- Grandfather existing investments so old purchases remain under old rules.
- Replace the 50 per cent CGT discount with an inflation-indexed cost base or other mechanism.
- Use tax settings to redirect investment toward new housing supply.
APOA view
Housing affordability is a real problem, and tax settings can be part of the discussion. But private landlords also provide a large share of rental housing. Reform should be gradual, evidence-based and paired with genuine supply measures. A tax change without enough new housing can reduce investor participation without solving rental pressure.
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Disclaimer
This article is general information only and does not constitute legal, financial, tax, or investment advice. Please seek qualified professional advice and check current official guidance for your circumstances.