Labor's overhaul of negative gearing and capital gains tax (CGT) passed both houses of parliament on Thursday, becoming law after the bill cleared the Senate with Greens support and was ratified by the House of Representatives 98 votes to 39.
Labor MPs cheered as Prime Minister Anthony Albanese and Treasurer Jim Chalmers walked from the chamber. Coalition MPs yelled "shame." Only independent Rebekah Sharkie and One Nation MP David Farley crossed the floor to vote with the opposition.
Treasury confirmed in a Senate response on Thursday that 85% of the additional tax revenue over the forward estimates will come from the negative gearing changes, not the CGT overhaul. Of the estimated $3.6 billion in new revenue, approximately $3 billion flows from restricting negative gearing to new builds. The CGT changes contribute just 15% in the near term, as transitional arrangements allow existing investors to retain the 50% discount on gains accrued before 1 July 2027, after which cost-base indexation and a minimum 30% tax on real gains apply.
Over a decade, the combined CGT and negative gearing changes are projected to raise more than $40 billion. A separate minimum 30% tax on discretionary trust distributions is forecast to raise at least $4.4 billion a year from 2029-30, and more than $40 billion over ten years.
The bill passed with one unresolved issue. Under the current legislation, existing investment properties held in joint names would lose their grandfathered exemptions if one of the owners dies or the property transfers through divorce - a provision crossbenchers dubbed the "widow's tax." Independent senator David Pocock pushed for a fix, and Finance Minister Katy Gallagher confirmed in the Senate that it would be addressed in a second tranche of legislation.
Housing Minister Clare O'Neil said the government had been aware of the issue for some time. Treasurer Chalmers said the government "had taken particular care around our response" when asked about the issue on Wednesday, because it was "still considering the amendments being circulated in the Senate throughout the day." He said it was not unusual for large tax reform packages to be legislated in multiple tranches.
The changes take effect from 1 July 2027. Properties purchased before 12 May 2026 retain negative gearing entitlements under grandfathering provisions. Major lenders including ANZ, NAB and Macquarie have already updated their serviceability policies, with negative gearing now recognised only on new builds or pre-budget established properties.
