Property Tax Overhaul Clears Lower House: What's at Stake

Negative gearing rules and capital gains tax settings are heading for a Senate battle after clearing the lower house 94 votes to 48.

The House of Representatives passed legislation on 4 June 2026 that would significantly reshape how property investors are taxed in Australia. The bill cleared the lower house 94 votes to 48, but the real test comes in the Senate, where the Greens hold the balance of power and have signalled they may push for even stronger reforms.

Here is what you need to know before the changes take effect — potentially as soon as 1 July 2026.

What the Legislation Actually Changes

The bill targets two of the biggest tax concessions in Australian property investment: negative gearing and capital gains tax.

**Negative gearing on established homes** is being restricted under the new arrangements. The legislation introduces changes to how negative gearing applies specifically to established dwellings — part of what the government describes as addressing "intergenerational inequity." The intent is to limit the ability of investors in established housing to offset rental losses against their other income in the same way they currently can.

**Capital gains tax** is being overhauled more substantially. Under current law, investors who hold an asset for more than 12 months receive a 50 per cent discount on their capital gain before it is assessable for tax. The bill replaces this with an inflation-adjusted indexation method, which calculates the real gain by adjusting the original cost base upward for inflation over the holding period. A minimum tax rate on net capital gains is also introduced.

The practical difference between the 50 per cent discount and indexation depends on how long you have held the asset and what inflation has been over that period. For properties held over long periods in high-growth environments, the two approaches can produce materially different tax outcomes. Working through the implications with your accountant and mortgage broker before 1 July is worth doing promptly.

The bill also included a $1,000 instant tax deduction and a $250 tax cut for wage earners — separate measures bundled into the same legislation.

Two amendments were put to the vote during the lower house debate and both were defeated. Independent MP Monique Ryan moved to lift the threshold for small businesses claiming capital gains tax exemptions. Independent MP Zali Steggall proposed restricting the CGT changes to property only, which would have left shares and other assets subject to the existing 50 per cent discount. Both were voted down.

The Senate Process: A Short but Significant Window

The bill will not proceed directly to a Senate vote. Both the Coalition and the Greens argued that significant legislation set to commence on 1 July must face proper scrutiny, and the upper house agreed to refer it to the Senate economics legislation committee for a short inquiry.

Hearings are scheduled for 15–16 June 2026. The committee must report by 22 June — nine days before the proposed commencement date.

The Greens, who hold the balance of power in the Senate, have made clear they are not simply waving the bill through. In a joint statement issued on 28 May, Greens senators Nick McKim and Larissa Waters indicated the inquiry process may shape what the Senate ultimately considers.

"We will use this inquiry to examine how and why Labor decided to leave in place the vast majority of tax handouts for the ultra wealthy," Senator McKim said. "As with so many parts of Labor's budget, this bill is a missed opportunity to finally put people ahead of profits and make the ultra-wealthy pay their fair share. Labor's extremely generous grandparenting provisions have left so much money on the table."

Senator Waters framed the issue in terms of younger Australians: "We are hearing countless young people and first home buyers express their frustration that Labor is letting wealthy property investors keep billions in handouts — an inquiry will help examine the consequences of Labor's decision on grandfathering."

The Greens may seek amendments as a condition of their support. Whether Labor can assemble crossbench numbers if that happens remains an open question heading into the June hearings.

What This Means for Investors and First Home Buyers

If you own an investment property — or are considering purchasing one — this legislation directly affects your after-tax returns and your approach to borrowing. The grandfathering provisions within the bill mean that existing established property holdings may be treated differently from new purchases. Where that line is drawn, and whether the Greens push for changes to it, is still being settled.

The uncertainty is already affecting market behaviour. The negative gearing and CGT changes have contributed to a slowdown in auction activity as buyers and sellers wait to see exactly how the final rules land. That pause creates both risk and opportunity depending on your position.

For investors assessing their options, [comparing investment home loans](/home-loans/investor) gives you a clear picture of what is available across the market ahead of the Senate's final word. If refinancing your investment property to reduce repayments or access equity makes sense as part of your strategy, [reviewing refinance options](/home-loans/refinance) is worth doing while the market is in wait-and-see mode.

First home buyers may see reduced competition at auctions in coming weeks as some investors hold off. Understanding your own [borrowing capacity](/calculators/borrowing-power) before the Senate reports on 22 June positions you to move quickly if the right opportunity arises.

The Adviser reports the bill passed the lower house on 4 June 2026 and now heads to [Senate inquiry](https://www.theadviser.com.au/broker/48518-cgt-and-negative-gearing-changes-pass-lower-house), with hearings beginning 15 June and a report due by 22 June.