Highlights

• Treasury's consultation on Capital Gains Tax and Negative Gearing – Tranche 2 Legislation ran from 3 August to 21 August 2026 and is now closed.

• The property industry body of Australia, in a submission signed by chief executive Mike Zorbas and dated 21 August, asks for the window to be extended.

• The property industry body's Recommendation 5 targets the trigger date itself.

• Several of the Property Council's 18 recommendations deal with housing that does not fit neatly into the draft's categories.

What counts as a new home could soon decide whether an investor can offset rental losses against salary. Developers argue that the proposed eligibility clock is too short for the realities of selling completed projects.

What the Draft Test Says Now

Treasury's consultation on Capital Gains Tax and Negative Gearing – Tranche 2 Legislation ran from 3 August to 21 August 2026 and is now closed. It released four exposure draft packages, including one on the new residential dwelling and negative gearing activity exemptions. The distinction matters because the headline rule rarely tells the entire story. Timing, eligibility and supporting records can change the outcome for two people facing seemingly similar circumstances.

The Case for 36 Months

The property industry body of Australia, in a submission signed by chief executive Mike Zorbas and dated 21 August, asks for the window to be extended. Its Recommendation 4 seeks to extend the purchaser eligibility period in proposed subsection 5(6) from 24 months to 36 months. The submission argues that approval processes, construction programs, settlement periods and release strategies vary widely between projects. A 36-month period would better reflect ordinary development and sales cycles while maintaining a clear and reasonable limit, it says. The current market adds weight to that argument from the industry's point of view. A practical decision starts with the numbers, but should not end there. Compare the likely benefit with compliance costs, the chance that assumptions change and any restrictions that apply.

Start the Clock at First Occupancy, Not on Paper

The property industry body's Recommendation 5 targets the trigger date itself. It wants the eligibility period to start when the dwelling is first occupied as a residence by an owner or tenant. The submission says certification practices differ between jurisdictions and projects, with approvals that may be temporary, interim, staged or issued under different names. It points to Western Australia, where a temporary occupancy permit may be issued for title registration while the final permit may not arrive until several months later. As a fallback, it proposes a nationally workable completion trigger that recognises staged, interim and equivalent approvals. A policy can create an opportunity while still leaving taxpayers responsible for checking the conditions and keeping suitable evidence.

Build-to-Rent, Student Housing and Conversions

Several of the Property Council's 18 recommendations deal with housing that does not fit neatly into the draft's categories. Recommendation 6 would replace what the submission calls the strict acquisition time dwelling count with a project-based test directed to genuine net additions to housing supply, allowing staged developments to be assessed as a whole. One observation is useful context, not a guarantee about what happens next.

A Two-Year Review and the Supply Argument

Recommendation 18 calls for a statutory requirement that the Minister commission an independent review of the reforms within two years of commencement. The submission describes the package as a complex and highly interconnected framework and says it will take time for investors, advisers, financiers and administrators to understand how it works in practice. Cash flow, deadlines and documentation deserve attention before any commitment.

What to Watch Before July 2027

The key question is whether Treasury adopts any of the requested changes when it finalises Tax Reform No. 3 and introduces it as a bill. Proposed rules and draft administrative guidance should be distinguished from provisions already enacted.

General information only. This article is educational and does not constitute personal financial, tax or legal advice.