Australia’s CGT Overhaul Passes House, Senate Battle Looms June 05

Australia’s government passed landmark capital gains tax and negative gearing reforms through the House of Representatives on June 4 by a vote of 94 to 48. The bill replaces the 50% CGT discount with inflation indexation and introduces a 30% minimum tax on gains from July 2027. The Senate must vote before July 2, and the government needs Greens support to pass the measures, as the Coalition has confirmed it will block them.

What the Bill Changes

The reform removes the long-standing 50% CGT discount for assets held over 12 months. Instead, the cost base of an asset will be adjusted for inflation before tax is calculated. A 30% minimum tax rate applies to net capital gains from July 2027. New residential properties get a limited exemption, allowing investors to choose between the old and new methods. Negative gearing will be restricted to new builds, while losses on established properties can only offset rental income or property gains, not broader income.

The Senate Path Forward

Labor controls 30 of 76 Senate seats and needs the Greens’ 10 votes to reach 40, a majority. The Coalition’s 27 seats (21 Liberals plus 6 Nationals) are firmly opposed. The government aims to pass the bill before parliament’s winter recess on July 2. The Greens support the tax changes but are pushing for longer Senate inquiry time and stronger reforms, including removal of grandfathering provisions on existing investment properties.

Market Impact Already Visible

Commonwealth Bank economists downgraded their housing price forecast to flat growth for 2026, down from 3% at Budget and 5% in March. Sentiment has softened following the tax changes, with auction clearance rates falling below 2025 levels and homes taking longer to sell. New investor lending is expected to fall sharply over 2026. Sydney and Melbourne prices are recording falls, while Perth, Brisbane and Adelaide are growing at slower rates.

Political Opposition and Concerns

Opposition Leader Angus Taylor called the measures toxic taxes and confirmed the Coalition will attempt to block the legislation. The Greens raised concerns about discretionary powers given to the Treasurer through legislative instruments, questioning whether future treasurers could exempt specific properties from the new rules. Finance Minister Katie Gallagher noted these powers are disallowable by the Senate, which does not control Labor.

Final Thoughts

The CGT bill passed the House but faces a tight Senate vote before July 2. Labor needs Greens support to pass the measures, and market sentiment has already shifted with housing forecasts downgraded and investor lending expected to fall sharply.

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