Budget changes to the negative gearing tax benefit will impact Australia’s highest income earners, and those in their 40s and 50s, according to data from the Australian Treasury.
The Federal budget has removed tax deductions afforded to property investors who lose money on their investments.
The changes will only apply to existing properties, with investors still able to claim deductions on new builds.
University of Wollongong senior accounting lecturer, Dr Abdullah Al-Mamun said that higher-income earners have historically gained the greatest benefit from negative gearing.
“High income earners… have the opportunity to exploit the system or utilize the opportunity to exploit the system or utilize the tax loopholes we have by reducing their tax liability,” he said.
Source: 2025-2026 Tax Expenditures and Insights Statement (Australian Treasury).
Dr Al-Mamun also said that certain age groups, particularly those aged 40 to 59, have benefitted more from negative gearing, and as a result own more properties.
“If we look into the capital market or the investment market… you’ll see that it is highly concentrated among a particular age group,” he said.
“That particular group are holding a substantial percentage of properties.”
Source: 2025-2026 Tax Expenditures and Insights Statement (Australian Treasury).
Dr Al-Mamum said that removing negative gearing tax benefits will benefit younger generations.
“Now with these reforms, we will see that the investment will direct or redirect to some other industries,” he said.
“It’s a very good initiative or reform… to support younger Australians or younger taxpayers in Australia.”
The Australian Treasury has estimated that there will be 75,000 new owner-occupiers in the next decade.
University of Technology Sydney student, Angus Yasuda recently bought his first home jointly with his mother. He said he was happy to hear about the changes and feels heard by the government.
“I’m glad to hear about this news,” he said.
“It makes me feel like I have a voice as a young person and that the government is actually listening to our concerns.”
Source: Commonwealth bank.
However, University of Wollongong taxation law lecture,r Harry Abelas said the changes unfairly punish investors and discourage investment.
“For them to impose a tax, which is essentially a penalty on having a go, means that there is no incentive for anyone to have a go,” he said.
Mr Abelas said he believes this could have negative effects on the economy.
“Enterprise is what leads to economic growth and development,” he said.
However, Dr Al-Mamum said the changes will significantly increase government revenue.
“If you convert this percentage to the monetary term, it’s not pennies we are talking about, we are talking about billions of dollars,” he said.
“So that, of course, might benefit the government.”
Sources: 2026-2027 Federal Budget & the Grattan Institute.
The changes are set to come into effect on July 1 next year
Additional reporting by Koda Way and Caleb Arkapaw.
