Additional comments from Senator David Pocock

1.1In 2019, Labor took a broad suite of policy reform proposals, including reducing the CGT discount to 25 per cent and removing negative gearing to a federal election they expected to win but subsequently lost. As some commentators,[1] stakeholders and a growing number of the Australian Labor Party’s own ranks have said,[2] Labor overlearned the lessons of that election loss and has been shy to pursue meaningful reform of, what many argue, is an overly generous property tax concession regime.

1.2With a record majority in the House of Representatives and a Senate crossbench urging them to do more on housing, now is the time for Labor to pursue that reform. This is a reform I have been pushing for prior to being elected and throughout my first, and now during my second, term as a Senator for the ACT. It’s a change people in my community want to see both for the impact it will have in reducing competition for first home buyers seeking to enter the market, but also for the signal it sends about changing how we treat housing from being seen purely as an asset class and vehicle of wealth creation to a fundamental human right all Australians should be able to access.

1.3Changes to property tax settings alone will not solve Australia’s deep housing affordability challenges, but they will help when enacted alongside a range of other measures. These include things like fostering a more effective construction workforce training and planning pipeline. As Infrastructure Australia has warned Australia's shortage of construction workers for major projects is set to hit 300,000 by the middle of 2027.[3] Master Builders Australia has also underscored this point saying:

Over the next five years, the industry will require more than 500,000 new entrants to replace those retiring and to expand its workforce sufficiently to meet future housing and infrastructure needs.[4]

1.4The rapid, largely unregulated and uncoordinated surge of AI data centre construction in Australia[5] isn’t just putting a strain on our energy and water resources,[6] it’s also exacerbating existing construction workforce shortages. With more AI Data Centres now being built than other buildings, it’s diverting construction workers away from the much-needed task of delivering new housing supply to feed the voracious AI beast.

1.5While the Albanese Labor Government has made welcome investments towards increasing the supply of crisis, social and affordable housing, especially through the Housing Australia Future Fund (HAFF), solving Australia’s housing affordability challenge will require a much greater level of funding. The $500 million per year floor for the HAFF, which is now in its third and final round, barely touches the sides of unmet demand. As Emeritus Professor of Housing at UNSW City Futures Centre Hal Pawson said, 'While we’re building far more than we did from 2000 to 2020, it's still not enough'.[7] As Professor Pawson and Associate Professor Chris Martin's recent paper highlights:

The projected net increase of 55,000 dwellings by the end of the decade is striking. Yet it pales alongside the estimate that 437,000 households had an “unmet need” for social housing on census night in 2021.[8]

1.6As every government of every political persuasion regularly reminds voters, budgets are about priorities. This next budget needs to prioritise greater investment in new social and affordable housing supply, over and above the commendable investments made to date. And if the Expenditure Review Committee wants to know where to find the revenue to fund such investment, then there’s a proposal sitting on the table to levy a 25 per cent tax on gas exports, that has the support of the senate crossbench, ready to implement and raise upwards of $15 billion in additional revenue annually. Indeed, the reforms proposed here to the capital gains tax discount would itself restore billions in foregone revenue to the budget.

1.7Solving Australia’s housing affordability challenges also means not leaving the debate around population and immigration solely to politicians on the right who seek to stoke fear and pursue political gain from fuelling culture wars. We need to have a transparent, measured conversation about Australia’s population and migration settings. Better yet, we need a plan that ties those settings to housing, other infrastructure and impacts on the environment that come from urban sprawl. Last term the major parties withheld support both for my private senator's bill to legislate a ten-year National Housing and Homelessness Plan and a senate motion proposing an inquiry into population. We can't keep hoping for the best or leaving critical policy debates to an exchange of political talking points.

1.8While commending the committee’s work, and the committee chair in particular for negotiating support for this inquiry, and welcoming the committee’s findings, in these additional comments I want to take those findings further by proposing specific recommendations.

1.9In 2024, Senator Jacqui Lambie and I asked the Parliamentary Budget Office (PBO) to model six reform options for negative gearing and the capital gains tax discount.[9] One of the most modest reform options we had costed would save the federal budget $16 billion in tax concessions not foregone by 2033–34. This option would remove the CGT discount for all residential property assets purchased after 1 July 2024, with property assets purchased prior to this date to be grandfathered under existing CGT discount arrangements, but provide a 25 per cent CGT discount for new homes built after 1 July 2024, if these homes are held for longer than three years and remove negative gearing arrangements for an investor's second or subsequent investment property interests and disallow rental deductions for vacant properties.

1.10As much of the testimony to the committee inquiry highlighted, reform to generous property tax concessions is an important measure for addressing the growing intergenerational equity divide.

1.11As Think Forward highlighted, 'the discount drives inequality between and within generations'.[10]

1.12Financial journalist Alan Kohler gets to the heart of the underlying structural problem when he says 'capital and wealth are not taxed enough, and labour is taxed too much, especially now as we enter the new era of AI that replaces labour'.[11] Younger generations bear the brunt of the tax on labour but benefit less from the tax concessions on capital.

1.13On the generosity of the capital gains tax discount Mr Kohler notes:

On September 20, 1999, the 14th anniversary of the introduction of the capital gains tax, a 50 per cent discount replaced the previous inflation adjustment.

It was absurdly generous: Inflation in the year to September 1999 was 1.8 per cent. The average holding period for an investment property is eight years, so a 50 per cent adjustment was more than three times the previous inflation adjustment.

Even if you take the average inflation rate over the subsequent eight years—3.2 per cent—which is also what the Reserve Bank is currently forecasting for the next three years, the new CGT discount in 1999 was, and still is, twice as generous as it needs to be to offset inflation.[12]

1.14As recent research from the Australian Council of Social Service (ACOSS) so clearly shows, the benefits of the capital gains discount is also distributed unevenly across the country. The electorate Fenner ranks 122nd out of 150 electorates for average capital gains tax discount per taxpayer.[13]

1.15The benefits also accrue primarily to investors, as the Australian Council of Trade Union (ACTU) evidence to the committee highlights. As of September 2025, 82.8 per cent of investor loans were for existing housing and only 12.6 per cent for new builds. Restricting the capital gains tax discount to new builds directly targets this imbalance. Effectively it would enable the redirection of some $21.79 billion in annual tax expenditure toward genuinely supply-creating investment rather than speculation on existing stock.

1.16Revenue generated from removing the capital gains tax discount on existing housing should be hypothecated toward social and affordable housing construction. This creates not only a social benefit but addresses the supply impact concerns raised in the submissions from the Housing Industry Association and Master Builders Australia. In responding to the objections raised by NSW Treasury, suggesting that investors would either stick with existing properties or shift to other asset classes if the discount were restricted to new builds, I would make the point that this is precisely the behavioural effect desired. We need to proactively use our tax levers to shift speculative capital out of existing housing stock As Urban Taskforce Australia conceded, the 'current uniform treatment of all housing stock distorts investment decisions, inflating prices for existing dwellings while failing to channel sufficient private capital towards new construction'. Limiting the capital gains tax discount to new builds would channel more private and public (if budget savings are reinvested in new supply) capital to new construction. Restricting the capital gains tax discount to new builds does not reduce the overall generosity of the concession for productive housing investment, it merely redirects it. Investors who genuinely want to use the discount can still access it, simply by investing in new construction rather than competing for existing stock.

1.17Restricting the capital gains tax discount to new builds not only moderates existing-home prices but actively creates new housing stock that younger Australians can purchase—making it a positive intergenerational policy rather than merely a punitive one.

1.18While improving intergenerational inequity and making it easier for more Australians, (both young and older) to attain home ownership should be a key focus of any reform, we also need to keep front of mind the roughly one-third of Australians who rent. A big part of the vested interest fear campaigns run around any reforms to property tax concessions is that they will drive up rental prices. This is not a foregone conclusion and depends very much on the settings of the reform.

1.19Per Capita's evidence shows that a property sold by an investor either goes to another investor (no change in rental supply) or to a first home buyer (one fewer rental property but also one fewer renter), and the Grattan Institute's modelling shows median rent increases of less than $1 per week even if 10 000 fewer homes were built over five years. Restricting the discount to new builds redirects investor incentives toward genuinely new rental supply, and an increase in supply helps put downward pressure on prices.

1.20Remove the CGT discount for all residential property assets purchased after 1 July 2026, with property assets purchased prior to this date to be grandfathered under existing CGT discount arrangements, but provide a 25 per cent CGT discount for new homes built after 1 July 2026, if these homes are held for longer than three years. Simultaneously reform trusts so they can not be used as a 'back door' measure to reduce the effective capital gains tax rate.

Recommendation 2

1.21Remove negative gearing arrangements for an investor's second or subsequent investment property interests and disallow rental deductions for vacant properties from 1 July 2026.

Senator David Pocock

Participating Member

Footnotes

[1]John Kehoe and Patrick Durkin, 'Fiddling with CGT won't fix the housing crisis for young buyers', Australian Financial Review, 27 February 2026.

[2]Australian Financial Review, 'Kelty is right. It's time for generational CGT and income tax reform', 23 February 2026.

[3]Infrastructure Australia, 2025 Infrastructure Market Capacity Report, 13 November 2025.

[4]Master Builders Australia, 'Backing apprentices is key to fixing the housing crisis', 15 April 2025 (accessed 17 March 2026).

[5]Luke Kinsella, 'Data centre investment doubles to $2.8b in just months', Australian Financial Review, 27 November 2025.

[6]Josh Taylor and Petra Stock, 'Thirsty work: how the rise of massive datacentres strains Australia's drinking water supply', The Guardian, 5 December 2025.

[7]Hal Pawson, '55,000 extra social housing homes are being built. But a new study shows that boom still falls short', The Conversation, 17 February 2026.

[8]Hal Pawson and Chris Martin, The revival of social housing construction in Australia 2020–2030, UNSW City Futures Research Centre, Working Paper, February 2026.

[9]Parliamentary Budget Office, 'Policy Reform Options for Negative Gearing and Capital Gains Tax', Policy Costing, 6 March 2024.

[10]Mr Thomas Walker, Chief Executive Officer, Think Forward, Committee Hansard, 23 February 2026, p. 29.

[11]Alan Kohler, 'Reducing inequality means taxing capital more—including inheritances', ABC News, 23 February 2026.

[12]Alan Kohler, 'Reducing inequality means taxing capital more—including inheritances', ABC News, 23 February 2026.

[13]Australian Council of Social Service, 'The unfair distribution of the CGT discount by electorate', Briefing Note, March 2026.