Prime Minister Anthony Albanese and Treasurer Jim Chalmers are facing renewed pressure to overhaul Australia’s negative gearing rules amid growing concern about housing affordability and younger Australians being locked out of the property market.
Unions and housing advocates are calling for the tax concession to be limited to one investment property per person. They argue this would curb the disproportionate benefits flowing to wealthier investors while freeing up housing stock for first-home buyers.
Liberal senator Andrew Bragg has slammed the Australian Council of Trade Unions’ (ACTU) proposal to limit negative gearing tax breaks to one investment property, labelling it “absolute garbage”. Speaking to ABC National Radio, Bragg said the idea would do nothing to solve the housing crisis, arguing the real issue is a collapse in housing construction alongside record population growth. “Raising taxes on housing is not going to result in any new houses being built,” he said.
While critical of the ACTU’s plan, Bragg said the Liberal Party would work with Labor to reduce red tape in the building sector, which he claims has increased under the current government. “We’re happy to help them find ways to cut red tape, and if good ideas come out of these roundtables, then we’ll back them,” he said, comparing the government’s change of course to “turning around the Titanic.”
The ACTU argues limiting negative gearing and capital gains tax concessions to one property would help open the housing market to workers priced out by wealthy investors. RMIT research suggests such a change would affect one in seven property investors. Labor has not signalled any intention to alter negative gearing rules, but has kept “all options on the table” as it considers reforms to boost productivity.
Negative gearing, which delivers billions in tax benefits annually, has long divided opinion. It occurs when an investor’s rental property expenses – such as mortgage interest, strata fees, and maintenance – exceed the rental income. The resulting loss can be deducted from their taxable income, reducing the amount of tax they pay. Treasury data shows 1.1 million Australians claimed negative gearing in 2021–22.
The policy was introduced in the 1930s to boost rental supply during housing shortages. Australia’s tax system allows all sources of income to be combined, and legitimate expenses incurred in earning that income – including investment property costs – to be deducted. While the principle is the same as claiming work-related expenses, the scale of benefits is far greater for high-income earners. Treasury figures reveal the top 30 per cent of income earners claimed about 65 per cent of all negative gearing benefits in 2021–22.
Supporters say negative gearing encourages investment in rental housing, helping to maintain supply in a tight market. They warn that removing it could see investors hike rents or sell properties, further reducing rental stock. Critics counter that the policy fuels competition for existing homes, pushing prices up, and that it disproportionately benefits the wealthy at a substantial cost to the budget – $2.7 billion in forgone tax revenue in 2020–21, a figure likely higher today due to rising interest rates.
Housing affordability has worsened sharply. Research from the Australian Housing and Urban Research Institute (AHURI) found that in 1996, high-income families made up just 8 per cent of renters; by 2021, that figure had jumped to 24 per cent.
Despite mounting calls for reform, both Labor and the Coalition have repeatedly ruled out changes to negative gearing. The Greens remain staunchly opposed, arguing it entrenches inequality in the housing market.
Past attempts at reform have failed. The Hawke-Keating government curtailed negative gearing in 1985 but reinstated it two years later following lobbying from investors and a spike in Sydney rents. In 2019, then Labor leader Bill Shorten proposed restricting it to newly built properties, but Labor’s election loss saw the idea abandoned.
Internationally, approaches vary. Germany, Japan, and Canada offer similar concessions, while the US limits deductions to rental-related income. The UK taxes rental and employment income separately, and New Zealand is phasing out negative gearing altogether.
With home ownership rates among younger Australians at historic lows, the political debate over negative gearing – and who it truly benefits – is unlikely to fade anytime soon.
