IN BRIEF
- The budget limits negative gearing to new builds and changes capital gains tax concessions.
- Some argue housing tax reforms may help first home buyers, but won't dramatically improve affordability.
A gamble to reform tax perks used by property investors in favour of boosting home ownership might not create the shift so desperately needed, an economist says.
In its 2026-27 federal budget, the government argues existing tax settings have exacerbated affordability issues and created an environment geared towards an investor-owned market.
Hoping to flip this script, it has limited negative gearing concessions to new builds and replaced the capital gains tax (CGT) discount with an indexation measure.
The changes also include the closure of a loophole that allows family trusts to be used to pay less tax, with a minimum 30 per cent charge on capital gains coming into effect.
The government expects the suite of measures to help reverse the last decade of home ownership decline and see 75,000 additional owner-occupied properties come onto the market over a decade.
EY Chief Economist Cherelle Murphy told SBS News that this is a "step in the right direction".
She said the government is banking on the theory that fewer incentives for investors will lead to more opportunities for first home buyers, but doubts that it will have a major impact.
"The foundations are there, but it's not going to move the dial," she said.
There have been 630,242 home loans for first home buyers over the last five years, according to the Australian Bureau of Statistics.
"I don't think that the changes are big enough in themselves to show a significant change in the affordability of housing for first home buyers," she said.
Treasury modelling estimates that house price growth will temper, increasing by an average 4 per cent instead of 6 per cent, for a couple of years due to the changes
"That means that the homeowners will be able to get into the market at a slightly lower price than they would otherwise," she said.
"However, it doesn't take house prices backwards, so it doesn't actually make affordability any easier. It's just a less bad outcome ... it's not necessarily fixing the problem."
One Nation MP Barnaby Joyce labelled the suggestion that the changes would make first homeowners more likely to enter the market a "fallacy".
"As far as you go with houses, this fallacy that there are a range of people out there only renting because they wanted to," he told the ABC's Insiders program on Tuesday night.
"[That] they are undercover first home buyers and renting because they wanted to. Now they brought in the change, they will become first home buyers. No, they won't."
Renters 'dealing with scraps'
Chels Hood Withey, a 30-year-old renter from Mullumbimby, said the budget measures are like "dealing with scraps".
The housing advocate and founder of Housing You had hoped for a "reset" and was particularly frustrated by the grandfathering of negative gearing.
"That obviously isn't going to shift the dial or change investor behaviour for a bunch of people who really are, what we would say, the drivers in this housing crisis," she told SBS News.
"They're what we call the house hoarders who have pushed rents up, locked people out, and massively increased house prices to the point where young people can't afford a home."
She said the tax system needs to be equitable and fair, taxing wealth instead of those who work hard.
"Not only are they paying rent or crazy mortgages, but then they're also subsidising someone to have 10 houses," she said. "That's not a fair system."
She added that a complete scrapping of negative gearing and CGT could have been redirected to public housing, giving more people "stable, secure and accessible" housing.
Will the tax changes pass parliament?
Changes to CGT and negative gearing were central to Labor's unsuccessful 2016 and 2019 election pitches, and the party fervently denied they were on the cards in the lead-up to the 2025 election.
With the Coalition attacking the changes as a "broken promise" that will hurt Australia, to pass the raft of tax changes, the government will seemingly need Greens and crossbench support in the upper house.
On Tuesday night, Greens leader Larissa Waters said the budget only "tinkered" with tax reforms, criticising the grandfathering of negative gearing as "baking the inequality in".
"This was a real opportunity for the government to step up and help people, and instead they've delivered a budget that simply feathers the nest of wealthy corporations and the 1 per cent," she said.
However, Waters stopped short of explicitly stating whether the Greens would pass the changes in Labor's proposed form or request further amendments as a condition of her party's support.
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