Treasurer Jim Chalmers has restricted negative gearing concessions to newly-built homes in the 2026-27 federal budget handed down on Tuesday night, with existing investors grandfathered under current arrangements and Australia’s 280-strong frame and truss sector first in line for new-build demand. That is according to budget papers tabled alongside Chalmers’ speech to the House of Representatives, which confirmed the carve-out flagged in pre-budget reporting and previously recommended by industry groups including the Australian Forest Products Association.
The reform stops short of broader changes floated in pre-budget reporting, with the Treasurer retaining the 50 per cent capital gains tax discount on existing investments and setting aside a possible return to the inflation-indexed method that applied until 1999. Chalmers has described the carve-out as a response to intergenerational unfairness in the housing market, with the change targeting an estimated $12.3 billion in annual negative gearing tax expenditure under federal projections.
The reform will direct investor capital into the country’s residential construction pipeline, with prefabricated frames, panels and roof trusses the largest beneficiary of new-build demand. 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 1.2 million homes target by June 2029.
AFPA acting Chief Executive Officer Richard Hyett, who recommended the reform on behalf of the association in a 2024 Senate inquiry submission, said the carve-out would expand demand for Australian-grown timber across residential construction. “This reform will boost confidence in the construction sector and drive new investment,” Hyett said.
The budget commits a further $500 million to implementing reforms to the Environment Protection and Biodiversity Conservation (EPBC) Act, including $28 million over two years allocated specifically to transitioning the forestry sector into the new arrangements. The forestry funding will resource bilateral negotiations between the Commonwealth and state and territory governments, with assessment agreements required before approvals under the new national environmental laws can be streamlined.
A separate budget measure providing free public access to Australian Standards has also drawn AFPA support, with Hyett arguing the change will cut compliance costs for builders whilst strengthening support for modern methods of construction.
Wood Central understands the build-to-rent sector remains a parallel beneficiary of investor-pipeline reform, with tax concessions passed in 2024 already directing institutional capital into mass timber 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, which delivers more than 7,000 homes a year — anchors that institutional shift.
Australia’s forestry, wood products and pulp and paper industries — collectively the country’s sixth largest manufacturing sector — will share in the $28 million transition allocation, with Hyett confirming the funding is critical to meeting tight timeframes around the new national environmental laws.
Please note: Wood Central will have further coverage about the budget in the coming hours.
