Labor reached agreement with the Greens on Tuesday to pass changes to capital gains tax and negative gearing through the Senate, breaking a legislative deadlock that had stalled the government’s housing tax agenda.

The deal secures the government the parliamentary numbers needed to clear the upper house this week. Legislation encompassing the tax reforms and an extended housing and NDIS package is expected to pass parliament in the coming days.

Greens backing for the tax changes came in exchange for an expanded NDIS arrangement, linking disability services funding to housing tax policy in a single legislative bargain. The trade-off reflects the crossbench negotiation required to advance government legislation through the Senate, where Labor lacks an outright majority and must secure support from minor parties to pass its agenda.

What Is Negative Gearing?

Negative gearing allows property investors to deduct rental losses against their taxable income, reducing their overall tax liability. The mechanism has long been a feature of Australia’s investment property landscape, with debate over its effect on housing affordability and property prices recurring in federal politics.

Under the negotiated terms, negative gearing would be restricted to newly constructed homes. The change limits the deduction to properties that add to the housing stock, redirecting investor capital away from competition for established properties and toward new construction.

Grandfathering Provisions for Existing Investors

Existing investors would be grandfathered under the reforms. Property owners who hold investment properties before the changes take effect would retain their current tax arrangements, preserving access to negative gearing regardless of whether their properties are new or established.

Capital Gains Tax Changes

Capital gains tax on investment properties would be indexed under the new framework. Indexation adjusts how profits on investment property sales are calculated, accounting for inflation over the holding period.

A minimum tax rate of 30% would apply to investment property gains, establishing a floor on the tax payable regardless of other deductions or offsets available to the investor.

Implementation Timeline

The changes are scheduled to take effect from 1 July 2027. The implementation date provides a transition window of approximately one year, giving investors and the property market time to prepare for the revised framework and adjust investment strategies accordingly.

Impact on Investors

Investors with existing holdings face no disruption to their current tax position. Grandfathering provisions ensure that the tax treatment applied before the reforms continues indefinitely for properties already in an investor’s portfolio, offering certainty to those who made financial decisions under the existing rules.

New investments made after the implementation date would operate under the revised rules. Investors seeking to access negative gearing would need to direct their capital toward new construction, a shift that changes the financial calculus for property investment by tying the tax deduction to supply-expanding activity rather than purchases of existing homes.

Future property sales would be subject to the capital gains tax changes. Indexation alters the calculation of taxable profits, while the minimum tax rate ensures a baseline level of tax is paid on gains from investment properties sold under the new framework. Both measures affect the timing and profitability of future sales, giving investors reason to reassess their holding strategies before the reforms take effect.

NDIS and Political Context

The National Disability Insurance Scheme provides funding for disability support services across Australia. The extended NDIS arrangement secured by the Greens connects disability services funding to housing tax reform in a single legislative package, tying two policy areas that had been negotiated on separate tracks into one vote.

Senate numbers had been the primary obstacle to the reforms. Without Greens backing, Labor could not secure the votes required to pass the legislation through the upper house. The agreement resolves that arithmetic and clears the path for the broader package, which combines housing tax reform with the extended NDIS measures.

Property investors now operate against a defined timeline. Those with existing holdings retain their current arrangements under grandfathering provisions, while those planning new investments must weigh the restriction of negative gearing to new builds, the indexation of capital gains tax, and the application of the minimum tax rate on investment property profits. Passage of the legislation this week would conclude months of negotiation, combining tax changes and NDIS funding in a single package that reflects the political compromise required to govern with a minority Senate position.