Aidan Devine
Updated 12 May 2026, 7:42pm
First published 12 May 2026, 7:41pm
The political rhetoric around the housing market has often been about investors outgunning first-home buyers but the reality is not as simple. Picture: Rohan Kelly
ANALYSIS
Treasurer Jim Chalmers’ landmark move to restrict negative gearing and reform capital gains tax settings in this year’s Budget has a critical flaw.
The reforms have been billed by government as a way to bridge differences in wealth between the generations, but the changes may actually entrench them.
Under the new reforms, investors will only be able to negatively gear newly built properties from July next year while current capital gains tax discounts for investors selling properties will be replaced by an indexation system tied to inflation.
But here’s the catch: critically, the government has announced that current investors will not be affected by the negative gearing reforms due to grandfathering provisions.
This means Gen X and Baby Boomers landlords will be able to keep the very tax mechanisms that helped them build wealth, while new investors will have that ladder to wealth yanked away from them.
Landlords own roughly a third of Australia’s private housing stock. Picture: Gaye Gerard
It seems the justification for these changes is rooted in a view that rich investors are buying homes at the expense of first-home buyers, but the reality is muddier.
Many investors aren’t wealthy. Increasingly, they are “rentvestors”, younger Australians who bought where they could afford while continuing to rent closer to work or family.
Others are accidental investors. They might have bought a unit in their 20s or 30s, lived in it for years, then moved out when they had kids. Rather than sell, they rented it out and bought another home.
The political rhetoric rarely acknowledges this because it is easier to frame the housing market as a war between investors and first-home buyers than admit that the system has become complex.
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Prime Minister Anthony Albanese and Treasurer Jim Chalmers have framed the negative gearing debate around intergenerational fairness.
And then there is another uncomfortable reality: these reforms may do little to stop the truly aggressive portfolio builders anyway.
The landlords with 30 or 40 properties are not succeeding because of negative gearing alone. Their real advantage comes from leverage.
Australia’s banking system allows investors to draw equity from rising properties and recycle this into new purchases.
Unlike first-home buyers or first-time investors, who must save big deposits, investors with established portfolios can often tap into equity in their existing assets to use for their upfront costs.
This is why there is a possibility these reforms could hurt mum and dad-type investors more than highly experienced investors.
MORE: Tax blow-up fuels record Aus landlord exodus
The government has banked on the negative gearing restrictions diverting more investment into newly built houses.
The young couple hoping to buy one investment property as a stepping stone to future security may now find the numbers no longer stack up.
Meanwhile, a small investor elite with established portfolios can continue buying rentals, knowing they can keep drawing out equity from the homes they already own and have the cost of these properties supported by their existing negative gearing arrangements.
The danger for Labor is that it delivers a policy that feels morally satisfying, while unintentionally deepening the divide between those who already own investment properties and those who never will.
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