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New modelling from the Parliamentary Budget Office shows that reforms to tax concessions on investment properties could boost housing affordability, rates of home ownership and deliver $60 billion in savings to the Budget over a decade.

The modelling was commissioned by ACT Independent Senator David Pocock and Tasmanian Senator Jacqui Lambie is the most sophisticated published to date and models a range of options and behavioural assumptions.

The crossbench senators said the modelling shows it is possible to protect people’s existing investments while moving to a model that uses tax concessions to incentivise new supply.

Senator Pocock said:

“The housing crisis is so widespread and so severe we need governments pulling every available lever to increase housing supply and affordability.” 

“Tax reform on its own won’t solve the housing crisis but it can be a powerful tool to drive new supply and should be on the table for sensible debate.”

Senator Lambie said:

“I think most Australians would agree that we need to fix the housing crisis and negative gearing is part of the problem. But protecting the mum and dad investors and retirees who have invested in housing must also be part of the solution. 

“Because this Labor Government got their arses kicked in the 2019 election, they won’t talk about fixing negative gearing. Senator Pocock and I have done the work and 

I hope the Treasurer and the Prime Minister will be brave and take this opportunity to consider these sensible reforms.” 

The PBO modelling involved five distinct combinations of changes to negative gearing and the Capital Gains Tax discount. All five involved some degree of ‘grandfathering’; that is, exempting existing property investors from proposed changes.

The most modest reform option, where CGT discount is grandfathered for existing rentals and halved for newly built homes, with negative gearing retained for a landlord’s first rental property, saves the federal budget $16 billion by 2033-34. This is money that could be re-invested in the supply of desperately needed social and affordable housing.

The main behavioural impacts of tax reforms factored into the PBO projections are the likely disposal of some rental properties by existing property investors and a reduced number of potential investors acquiring homes for this purpose. With more rental properties being sold and fewer aspiring property investors among potential buyers during this adjustment period, first home buyer acquisitions would likely increase, pushing up the home ownership rate from its currently depressed level.

Although possible house price moderating impacts of investor tax reform options were not specifically estimated in the PBO modelling, previous calculations by the Grattan Institute projected that abolishing negative gearing and halving the CGT discount would leave prices 2% lower than what they would otherwise have been.

Research undertaken by NSW Treasury showed that in modelling the impact of abolishing negative gearing and halving the capital gains tax discount for landlord investors would ‘increase the owner-occupied share of the private dwelling stock by 4.7% effectively returning home ownership in Australia to 1990s levels. (1)

Polling commissioned by Per Capita in late 2022 for their 2023 report ‘Australian Housing Monitor’ also found that 56% of people surveyed agreed that ‘Governments should remove tax deductions for housing investors and use the money to build more public and community housing’. Even among Liberal voters 48% supported (and only 23% opposed) removing tax deductions for housing investors with the funds being used for more social housing.(2)


(1) Warlters, M. (2024). The effect of negative gearing and capital gains tax reform on home ownership. Australian Economic Papers, 1–22.


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