It is one of Australian politics' most reliably explosive issues, and it is back. Negative gearing, the tax concession that allows property investors to deduct rental losses from their taxable income, has returned to the centre of the federal debate as the Greens apply sustained pressure on the Albanese government in exchange for support on housing legislation.
For West Australians already stretched thin by rising rents in Perth and a chronic shortage of affordable homes, this is not an abstract policy argument. It is a question about who the tax system is actually designed to serve.
Labor has been careful with its language, describing its position as an open consideration of possible policy rather than a firm commitment to change. That is not accidental. The party has painful institutional memory of the 2019 federal election, when its platform to limit negative gearing to new properties was weaponised by the Coalition and contributed to a loss that few inside the party saw coming.
The Greens, holding Senate crossbench leverage the government needs, are demanding substantive reform as their price for cooperation. Their position is consistent with long-held arguments that the concession disproportionately benefits wealthy investors and crowds out first home buyers competing for the same limited stock.
At its core, negative gearing works like this: if an investor's rental income is less than their mortgage and maintenance costs, they can claim that loss as a deduction against other income, including wages. Combined with the capital gains tax discount, which halves the tax owed on profits from assets held for more than a year, the arrangement creates a powerful financial incentive to hold investment properties, particularly in rising markets.
Proponents argue the system keeps rental supply healthy. Without it, the argument goes, many small investors would exit the market, reducing the number of available rentals and pushing rents even higher. The Real Estate Institute of Australia has long maintained this position, and it is not without some merit: Australia's rental market does depend heavily on private landlords rather than institutional investors or public housing.
Critics, including the Grattan Institute, counter that the concession primarily fuels demand for existing dwellings rather than new construction, inflating prices without adding to supply. Their research has consistently found that winding back negative gearing, particularly if targeted at new builds, would modestly improve affordability without triggering the rental market collapse that defenders of the status quo predict.
The Australian Bureau of Statistics data shows that the overwhelming majority of negatively geared properties are existing homes, which reinforces the supply-side critique. Building more homes is the mechanism that actually increases supply; buying an existing one simply transfers ownership.
The Coalition's position is predictable but not unreasonable on its own terms. Shadow Treasurer Angus Taylor has framed any changes as a threat to the millions of Australians who use negative gearing as a legitimate savings and investment vehicle. That framing resonates because it is largely accurate: the concession is widely used, not just by the wealthy. Nurses, teachers, and tradies with a single investment property are also in the mix, and they vote.
What the national coverage sometimes misses is the particular intensity of WA's housing stress. Perth's rental vacancy rate has hovered near record lows, and median rents have climbed sharply over the past three years. A reform that reduced investor demand for established properties could theoretically ease some of that pressure, though the effect would depend heavily on design and implementation.
The politics of any deal between Labor and the Greens will be as important as the policy itself. The government will be acutely conscious of how any announcement is framed, almost certainly emphasising protections for existing investors and targeting changes at new incentives for construction rather than a blunt removal of existing concessions.
Reasonable people disagree about the right answer here, and the evidence on outcomes is genuinely mixed rather than settled. What is less contestable is that the current system, combined with persistent underbuilding across most of the country, has contributed to a housing affordability crisis that is squeezing renters, blocking first home buyers, and placing growing strain on public services. The question is not whether something needs to change. The question is what changes are politically survivable, economically sound, and likely to actually help the people who most need it.
From Perth, that question feels rather urgent. Canberra would do well to treat it that way.