The property development industry has given a cautious tick to parts of the government's latest housing tax bill, including what it calls "more targeted" anti-avoidance provisions. But the Urban Development Institute of Australia (UDIA) warns that development trusts and infrastructure vehicles that channel international Capital into new housing could still face extra cost and compliance burdens, just as a Senate committee prepares to hear evidence this week.

The bill in question

The Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 is the second Tranche of the government's CGT and negative gearing changes. It passed the House of Representatives on 29 October, according to industry and media reports, and is now before the Senate.

According to the Treasurer's second reading speech, Schedule 4 contains the second CGT tranche, covering more complex cases including trusts. Schedule 5 defines a "new residential dwelling" for the negative gearing changes and sets out exemptions, including for affordable and public housing.

That definition matters to developers. Under the enacted first tranche, negative gearing is limited to new builds for properties bought after 7:30pm AEST on 12 May 2026, from 1 July 2027. Existing holdings are grandfathered. The Demand for new housing from investors therefore depends partly on what counts as "new".

What UDIA welcomed

In a statement on 20 October, UDIA National welcomed the Senate inquiry into the bill. It credited the bill with removing the so-called "widows tax", excluding retirement living, and including "more targeted tax avoidance provisions".

The anti-avoidance point follows criticism of the exposure draft, which industry groups had argued could apply where avoidance was only one purpose of an arrangement. UDIA's description of the introduced bill as "more targeted" is its own characterisation; the exact drafting changes are set out in the bill and its explanatory memorandum.

The warning on development trusts

UDIA's main concern is how the changes land on the vehicles that finance new supply. It says commercial infrastructure and development trusts, which attract international capital into new housing, face added cost and compliance burdens.

It also warns that the incomplete fixed-income election and rollover provisions risk forcing significant restructuring, with stamp duty costs attached.

"There are substantial unanswered questions from industry," UDIA's Stanley said, adding that "the current housing tax settings simply don't make the grade."

Stamp duty is a state tax, and a federal bill cannot by itself switch it off. If a development trust has to move property into a new structure to fit the federal rules, the state duty bill can be large.

Hypothetical example: a development trust holds a site valued at $40 million and needs to transfer it into a new entity to fit a revised structure. Assume, for illustration only, a duty rate of 5.5% applies to the transfer.

The duty would be $40 million multiplied by 5.5%, or $2.2 million, before any legal, valuation or advisory fees. That cost is incurred by the developer without any new home being built.

Actual duty depends on the state, the type of transaction and any exemptions or concessions. The rate used here is an assumption, not a quote of any state's duty schedule. This example is general information only.

State taxes and the Supply backdrop

International investors in Australian development also face state taxes that sit alongside the federal changes. Victoria offers a recent example.

The Victorian government announced on 14 October that developers meeting its Development Facilitation Program criteria would be exempt from the land tax absentee owner Surcharge during construction, with residential developments covered for up to two years after completion. SRO Victoria said new exemption guidelines were published in the Government Gazette on 28 October.

The surcharge remains 4% of taxable land value, and the program criteria include a development cost of at least $50 million in metropolitan Melbourne or $15 million in regional areas, with at least 10% affordable housing. On those figures, a site with $20 million of taxable land value would pay $800,000 a year in surcharge without the exemption.

The Housing Industry Association has argued the surcharge should be cut entirely rather than just for government-preferred projects.

The industry's warnings come as new housing activity shows signs of strain. ABS data released on 2 November showed total dwelling approvals rose 5.1% to 17,948 in September in seasonally adjusted terms.

But private house approvals fell 5.3% to 10,432, which the ABS's Daniel Rossi said was "the largest since August 2025". Private dwellings excluding houses rose 16.6% in the month but were down 20.5% on a year earlier.

Rates are also rising. The RBA lifted the cash rate to 4.85% on 3 November and said higher rates and falling housing prices and turnover were expected to weigh on dwelling investment.

Where the Senate inquiry fits

The Senate Economics Legislation Committee is examining Tax Reform No. 3 alongside the bill for a minimum tax on discretionary trusts. Hearings are scheduled for 5 and 6 November, with a report due on 13 November.

Other groups have also raised concerns. The Tax Institute has asked for a timetable for the remaining tranches and a consolidated status summary of the whole package, and criticised the short consultation timeframe.

The committee may recommend amendments, which could include changes affecting development trusts. Any changes would need the support of the Senate and, if amended, the House.

What to watch

  • 5–6 November: scheduled Senate committee hearings, where industry groups may give evidence.
  • 13 November: committee report due, including any recommendations on anti-avoidance rules, development trusts or rollover provisions.
  • Later tranches: the government is expected to legislate further CGT changes, including roll-overs, which bear directly on restructuring.
  • 1 July 2027: the negative gearing limit for established properties bought after the 12 May 2026 budget takes effect, along with the new CGT regime for gains accruing from that date.

Whether developers get further relief will depend on how the Senate deals with the bill in the coming weeks.