Labor reaches deal with the Greens to pass changes to capital gains tax and negative gearing reforms

Labor and Greens Form Pact to Advance Tax Policy Shifts

Labor reaches deal with the Greens - In a pivotal political move, the Greens have joined forces with the Labor Party to support a major overhaul of Australia's capital gains tax and negative gearing frameworks. This agreement, finalized after weeks of negotiations, marks a crucial step toward passing the government’s budget plan, which has drawn mixed reactions from across the nation. By aligning on these reforms, the two parties aim to address concerns over housing affordability and wealth distribution, ensuring the plan moves forward despite earlier resistance from key stakeholders.

The collaboration between Labor and the Greens centers on mutual compromises to ease opposition. The Greens initially criticized the government’s plan for its potential to burden lower-income households, particularly through the capital gains tax changes. However, the Labor Party offered concessions, including eliminating a provision that allowed self-managed super funds to bypass tax restrictions. This adjustment, coupled with the promise to revisit the reforms if needed, has been key to securing the Greens’ backing. The agreement now positions the budget for a critical parliamentary vote.

The revised capital gains tax model introduces a cost-based indexation approach, replacing the current 50% discount. This change, effective from 2027, will gradually adjust tax liabilities based on inflation, aiming to reduce the long-term benefit of the discount. Meanwhile, negative gearing will be phased out for properties purchased after 12 May 2026, with exceptions for new developments and specific government-supported housing programs. These measures are designed to redirect investment toward first-home buyers and limit tax advantages for existing investors.

“This deal represents a necessary compromise to ensure the budget can pass, but it’s not the final solution,” said Greens leader Larissa Waters. “We remain committed to protecting renters and ensuring fair access to housing, and this agreement is a small step toward achieving that goal.”

The partnership also includes adjustments to the government’s executive powers. Previously, the treasurer held broad authority to implement capital gains tax reforms unilaterally, but the deal narrows this scope. This modification balances legislative flexibility with oversight, allowing the government to adapt policies while maintaining accountability. The changes are expected to alleviate concerns from the Greens about the permanence of the reforms.

While the Greens have endorsed the tax reforms, they continue to advocate for protections in the NDIS. The deal also grants the party an eight-week extension for a Senate inquiry into the disability insurance scheme’s changes. This delay enables further scrutiny of the plan, which includes tightening eligibility criteria and introducing independent functional assessments. Critics argue these adjustments could affect over 240,000 participants, though the Greens have secured safeguards for essential support categories.

Implications for Housing and Disability Support

The Labor-Greens agreement underscores a shared commitment to improving housing affordability. Prime Minister Anthony Albanese emphasized the reforms’ role in enabling Australians to purchase homes, stating, “Hard-working families should not be penalized for their investments.” This sentiment aligns with the government’s broader goal of addressing income inequality, though the reforms face challenges in balancing investor incentives with social equity.

As the budget moves closer to approval, the focus remains on its impact on key sectors. The capital gains tax shift is projected to save $37.8 billion over four years, with resources redirected to support vulnerable communities. Meanwhile, the NDIS amendments, which have been delayed, will allow more time for stakeholders to weigh their concerns. This period of review is critical for ensuring the legislation aligns with the needs of people with disabilities, who may face reduced access to vital services under the proposed changes.