Highlights

  • Treasury's Budget papers estimate about 35,000 fewer dwellings over a decade, roughly 0.25% of the housing stock.
  • Treasury Secretary Jenny Wilkinson told a 4 June Senate hearing that rents would rise about $2 weekly.
  • Senator Andrew Bragg argued at Estimates that the reforms would shrink housing supply, including through self-managed super funds.
  • The Tax Reform No. 3 Bill, introduced on 14 October, awaits the Senate and adds a discretionary trust minimum tax.

Eight months out from 1 July 2027, when the new negative gearing and capital gains tax rules begin, two small numbers are carrying a very large argument. About 35,000 fewer homes over a decade. Rents roughly $2 a week higher. Senate Estimates this week reopened the question of whether Treasury's modelling understated the hit to the property market, though neither figure is new and no fresh Treasury numbers had been confirmed.

Where the two figures come from

The 35,000 comes from the Budget papers: about 35,000 fewer dwellings over the next decade compared with no policy change, or about 0.25% of the housing stock. The same estimate projected about 75,000 more owner-occupiers.

Finance Minister Katy Gallagher described the outcome as a net 30,000 more homes. That is her framing, and the figures as stated do not show how it was derived.

The rent estimate came later. At a Senate economics committee hearing on 4 June 2026, Treasury Secretary Jenny Wilkinson said rents would be about $2 a week higher because of the changes alone.

Treasury expected the market to tilt towards owner-occupiers and away from investors, meaning slightly fewer rental homes built or held.

What was raised at Estimates

A preview of the third day of Estimates said Treasury staff had come under scrutiny since the May Budget, with modelling said to have "underestimated the effect of tax changes" on property and rents. That is a characterisation, not a Treasury concession.

On Wednesday, Liberal Senator Andrew Bragg argued the CGT and negative gearing changes would reduce housing supply, including through self-managed super funds. The Coalition's dissenting Senate report states: "The Coalition believes the current CGT discount is working as intended and should not be changed."

Critics say 0.25% understates how strongly investors react to losing concessions. Supporters call the shift towards ownership the policy working.

What the law already does

The ATO says the measures "are now law" under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026, both starting 1 July 2027. Negative gearing is then limited to new builds, with properties held at 7:30pm AEST on 12 May 2026 grandfathered. The 50% CGT discount becomes indexation plus a 30% minimum tax for individuals, trusts and partnerships, on gains accruing after that date.

Nothing has started, so there is no direct evidence on rents yet.

Parliament is also weighing the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, introduced on 14 October. It would amend parts of the CGT and negative gearing rules and introduce a minimum tax on discretionary trusts. The Senate has not passed it, and the Coalition opposes the government's changes.

The market backdrop

RBA Governor Michele Bullock told Estimates on 28 October: "Housing prices are around 50% higher than they were in early 2020." The same day, the ABS reported September annual inflation of 4.3%, with housing the largest contributor at 5.2%. Rents rose 3.6%. Market pricing for a November rate rise then jumped from about 60% to about 79%.

Hypothetical example: putting $2 in context

A tenant pays $600 a week, or $31,200 a year. Treasury's $2 a week adds $104 a year, about 0.33% of the weekly rent. Rent rising in line with the 3.6% annual increase would add $21.60 a week, or about $1,123 a year, so the Treasury estimate is roughly a tenth of one year's general rent growth. The example is illustrative only.

What to watch

Thursday 29 October: submissions close for the Senate inquiry into the Tax Reform No. 3 bills. Monday 2 November: Cotality's October index. Tuesday 3 November: the Reserve Bank's cash rate decision. Friday 13 November: the committee is due to report.