13/05/2026
This is the REIQ’s opinion of the Federal Budget announced last night.
Australians are owed an explanation from the Federal Government on how recently announced changes to negative gearing and capital gains tax (CGT) actually create intergenerational equity.
With negative gearing only put on the tax reform agenda at the eleventh hour, last night’s Federal Budget announcement offered little insight into how this reform will materially help aspiring first homeowners or improve affordability.
Negative gearing will still apply to purchases of new builds, but for existing properties bought from today, the ability to benefit from negative gearing (to offset net rental losses against ordinary taxable income) will be abolished after a one-year transition period.
The budget also confirmed the Government will replace the 50 per cent CGT discount with a discount based on inflation and introduce a minimum 30 per cent tax on gains from 1 July 2027.
REIQ CEO Antonia Mercorella said the issue was not just about the Federal Government breaking a promise – it was its failure to outline and prove the objective and modelling behind the reform package.
“As a community I think it’s fair to say that we’re willing to accept (and sadly even come to expect) a broken political promise, but that’s only when there’s good grounds and justification for the decision,” Ms Mercorella said.
“In this case there’s no sound modelling on the overall impact of these complex reforms – just the ‘good vibes’ of addressing intergenerational equity.
“These reforms promise desperately needed pathways to home ownership, but in reality, they will only create a mere 7,500 new homeowners per year over the next decade across Australia.
“At this rate, it’s far from the solution young voters were hoping for, particularly when you consider that at the same time, the Treasurer expects 35,000 fewer homes being built as a result of these reforms.”
Ms Mercorella said it was a flawed theory that if there are fewer investors in future, aspiring first home buyers would immediately step in to fill the void.
“That’s an overly simplistic argument that negates the uncomfortable reality that price affordability - and the ability to save upfront deposits and costs and secure a mortgage - is actually what’s standing in their way,” she said.
“It’s important to understand that properties sought by investors and owner occupiers are not always interchangeable.”
She said while the REIQ acknowledges the grandfathering of existing investments, the changes to negative gearing and CGT are still expected to adversely impact rental property supply.
“The cessation of negative gearing for established homes coupled with potentially less generous capital gains tax discounts, will almost certainly drive-up rents,” Ms Mercorella said.
“This will only diminish the saving power of aspiring first homeowners already scrimping and saving to get their first foot on the property ladder.
“It also does nothing to address the supply side issues that are putting upward pressure on prices.
“Today’s aspiring homeowners may also be impacted in the future. Should they wish to invest in established property, they will not have the benefit of negative gearing like others before them have enjoyed for decades.
“We also expect to see these reforms materially weaken the appeal of rent-vesting for young Australians who use this strategy to get into the property market.”
She said the changes could also create greater inequity between household ‘mum and dad’ investors and institutional investors.
“Since the new rules do not apply to new builds, which are generally more expensive, this is also a policy that will arguably favour the big end of town,” Ms Mercorella said.
“Institutional investors such as large super funds (and people with large super balances) can afford to buy new and can do so through generous build-to-rent scheme incentives and sophisticated financial structures.
“Meanwhile, future mum and dad investors are being disadvantaged, which is concerning given private investors are heavily relied upon – by the government and the community - when it comes to housing our rental population.”
