HomeAUControversial Tax Break Faces Potential Cuts in Upcoming Months

Controversial Tax Break Faces Potential Cuts in Upcoming Months

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Jim Chalmers has effectively confirmed Treasury has looked into the impact of limiting one of Australia’s most contentious tax breaks for property investors, as speculation continues to build about a significant overhaul of the tax system in this year’s federal budget.

The treasurer addressed reporters today regarding speculation about his department’s activities, specifically whether they were analyzing the potential revenue from capping negative gearing to two investment properties.

“We haven’t altered our tax policies,” he responded.

Treasurer Jim Chalmers during Question Time in the House of Representatives at Parliament House in Canberra on February 12, 2026.
Jim Chalmers has turned down the opportunity to rule out changes to negative gearing. (Dominic Lorrimer)

He emphasized, “Our focus remains on implementing another income tax reduction in July of this year, followed by yet another in July of the next.”

He noted, “It’s quite typical for the Treasury to explore various options and future steps at this stage before the budget is finalized.”

He concluded, “However, any decisions related to these potential actions would ultimately rest with the cabinet.”

Negative gearing allows property investors to write off the costs associated with their loss-making rentals as a tax deduction.

Pedestrians move through the Pitt Street Mall
More than a million Australians are negatively geared. (Lisa Maree Williams/Getty Images)

A host of economists, politicians and unions have argued for removing or reducing the tax breaks, saying such a move would make property more affordable and could fund much-needed income tax cuts.

However, others have argued that would do little to address the housing crisis, and instead lead to less supply in the sector.

According to the Property Council, almost 1.3 million Australians use negative gearing. 

A previous analysis of ATO statistics estimated just under 30 per cent of those negatively geared taxpayers had two or more investment properties.

housing in Warriewood , Sydney's Northern Beaches
Political parties are under pressure from young voters to offer genuine solutions to the housing crisis. (Nick Moir)

Figures from the Parliamentary Budget office have shown negative gearing costs the federal government almost $7 billion a year, and the CGT discount for residential properties $5.4 billion, at the same time the budget has fallen into a structural deficit.

While Albanese has previously ruled out making changes to negative gearing – the proposal has widely been blamed on Labor’s shock 2019 federal election losses – Chalmers has frequently spoken about wanting to address the inequality facing young Australians.

That was a point he reiterated today.

“We are alive, obviously, to the intergenerational issues in the housing market and in the tax system,” he said.

The federal opposition has signalled it would fight any effort to roll back the CGT discount or negative gearing, although the government would likely be able to get any proposal through parliament with the support of the Greens.

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