- Labor confirmed reforms to negative gearing and CGT discounts starting from July 1, 2025.
- Existing exemptions will only apply to a first investment property purchased before the implementation date.
- Experts predict a pivot toward dividend-paying equities and potential rental price increases across Australia.
(AUSTRALIA) – Labor confirmed changes to negative gearing and the CGT discount for property investors, with implementation starting 1 July 2025 under the Parliamentary Budget Office costing of its 2025 election commitment.
The changes remove negative gearing for all assets except a first investment property held by an entity if it was acquired before 1 July 2025. Losses from other rental investments will offset rental income, not salary.
Labor also confirmed it will remove the 50% capital gains tax discount for investment properties, except the first investment property acquired before 1 July 2025. For other non-investment property assets, the 50% discount will be replaced by indexation of the cost base to inflation.
Existing investors will get a one-year reprieve for their first investment property if they hold assets before the start date. That transitional protection sits at the center of advice now circulating through mortgage and property circles, where timing has become the immediate issue.
Anyone trying to preserve the exemption for a first investment property now faces a hard deadline. Purchases completed before 1 July 2025 will sit in a different tax position from those settled after the new rules begin.
That distinction extends beyond housing. The reforms apply across asset classes, including equities, and UBS strategist Richard Schellbach predicted a “pivot away from growth equities and capital gainers towards income and dividend-paying equities.”
Schellbach said the policy could alter “investor behaviour. over the next decade or more.” The wording points to a broader change in how investors weigh capital growth against income once the current CGT discount treatment changes.
Labor’s confirmation revives a debate that reaches back four decades. In 1985, Australia temporarily limited negative gearing so losses could offset only rental income, not salary, and the policy was reversed in 1987.
During that earlier period, Sydney rents rose 43% and Perth rents rose 33.5% over 26 months, according to Real Estate Institute of Australia data cited in the policy discussion. Those figures remain a reference point for brokers and investors warning that a pullback in investor demand can tighten rental supply rather than ease pressure on tenants.
International examples cited alongside the Labor changes point in a similar direction. Comparable reforms in New Zealand and the UK saw house prices “barely move,” while rents increased and the policies were later reversed.
That history cuts against a simple expectation that winding back negative gearing and reducing the CGT discount will produce a large fall in home prices. Grattan Institute modelling put the maximum reduction in housing prices at 1-2%, a shift small enough that it is unlikely to materially shorten the time needed for many first-home buyers to build a deposit.
The estimate matters because Labor’s policy reaches into a long-running political argument about whether investor tax settings price owner-occupiers out of the market. A 1-2% change in prices would leave affordability pressures largely intact, while still reshaping tax treatment for investors who buy after 1 July 2025.
Brokers now have a narrow set of practical questions to answer. Clients who want the exemption for a first investment property have an incentive to complete purchases before 1 July 2025, while investors with more than one rental asset face a different treatment of losses once the new rules begin.
That advice carries a warning on rents. If investor supply contracts, brokers are expected to flag the risk of rent inflation, drawing on the 1985 experience in Sydney and Perth and on the overseas examples where rents rose even as home prices showed little movement.
Equity investors are also likely to reassess their portfolios under the new tax settings. Schellbach’s forecast of a “pivot away from growth equities and capital gainers towards income and dividend-paying equities” suggests the policy debate will not stay confined to housing.
Treasurer Jim Chalmers’ future announcements will draw close scrutiny because the proposals extend beyond property. The immediate confirmed measures cover negative gearing, the CGT discount and transitional treatment for a first investment property, but the wider tax discussion is still moving.
One issue that had circulated earlier remains outside the confirmed package. No finalized changes to discretionary trust taxation appeared in the available confirmations tied to the policy as set out so far.
The Parliamentary Budget Office costings now stand as the central reference point for advisers testing the detail of the election commitment. Until further announcements from Chalmers, the calendar date carries the clearest consequence: investors who want the old treatment for a first investment property must act before 1 July 2025.
