Treasurer Jim Chalmers is expected to use Tuesday night’s federal budget to carve out new builds for full negative gearing deductions and reduce the capital gains tax discount, with Australia’s 280-strong frame and truss sector set to be a major beneficiary if the budget tilts investor money towards new builds. That is according to pre-budget reporting by REA, which revealed the policy options now in play after Chalmers and Prime Minister Anthony Albanese declined multiple opportunities to rule out the changes.
Whilst Chalmers and the Prime Minister have refused to confirm the changes outright, the Treasurer has flagged the need to address what he calls “intergenerational unfairness in the tax system and in the housing market,” with the government’s stated aim of making it easier for Australians to enter the property market. Albanese repeatedly ruled out negative gearing changes ahead of last year’s election, with Labor’s 2019 election platform on the same policy decisively rejected by voters.
Among the policy options reportedly on the table, ideas include limiting negative gearing to a single property and ending the deduction for existing homes, whilst allowing investors to claim losses against new dwellings only. The net effect would ease investor competition for existing stock whilst routing capital towards the country’s residential construction pipeline, with negative gearing tax expenditure most recently estimated at $12.3 billion under federal projections.
Around 80 per cent of Australia’s detached and semi-detached housing relies on the country’s 280-strong frame-and-truss value chain, with timber the default building method behind the Albanese government’s 1.2 million target by June 2029. A new-build carve-out would direct investor capital straight into the construction pipeline, with prefabricated frames, panels and roof trusses first in line for any new-build demand.
Wood Central understands the build-to-rent sector is a separate but parallel beneficiary, with tax concessions passed in 2024 already routing institutional capital into mass timber-supported apartment towers across Brisbane, Sydney and Melbourne. Sumitomo Forestry’s $1.2 billion Trans-Tasman pipeline and its 51 per cent stake in Metricon — Australia’s largest housebuilder, responsible for more than 7,000 new homes a year — anchor that institutional shift.
The capital gains tax discount, currently set at 50 per cent for assets held for more than 12 months, is reportedly under review for replacement with the inflation-indexed method that applied until 1999. Property industry leaders have warned that the two reforms together risk slowing build rates and pushing rents higher if regulatory barriers to supply are not resolved first.
The country’s 280-strong frame and truss industry supplies around 80 per cent of detached and semi-detached starts, with the Australian Forest Products Association previously calling for specific policies to expand detached housing as part of the National Housing Accord. Wood Central understands Tuesday night’s budget will be handed down at 7.30 pm AEST, and the policy details will be released alongside Chalmers’ speech to the House of Representatives.
