Taxed Like Tobacco: Peak Body Warns Housing Sector Already Bears Heavy Tax Burden

The housing sector has warned that Labor’s tax reforms would increase the tax burden on property businesses, affecting consumers and reducing housing supply.

(L to R) HIA chief economist Tim Reardon, HIA Managing Director Jocelyn Martin, Property Council of Australia CEO Mike Zorbas, and Master Builders Association CEO Denita Wawn appear before the Senate Economic Committee in Canberra, Australia, on Jun. 15, 2026. Screenshot from parliamentary proceedings

A peak industry body for Australia’s property sector has raised concerns that the Labor government is “taxing property like tobacco” through its latest changes to capital gains tax (CGT), negative gearing and discretionary trusts.

Following the release of its 2026-27 budget, the government is pushing to replace the current 50 percent CGT discount with an inflation-based system that taxes only “real” gains, alongside a minimum tax rate of 30 percent on capital gains.

In addition, it would restrict negative gearing for residential property to newly built homes and impose a new minimum 30 percent tax on income distributed through discretionary trusts.

During a parliamentary inquiry into the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, Mike Zorbas, CEO of the Property Council of Australia, said housing was already subject to a heavy tax burden.

“The cost of each new home is now, in some states, almost 40 percent federal, state, and local government charges. That is where affordability begins and ends on housing,” he told the Economics Legislation Committee.

“Investment in industrial, commercial and residential property in this country is already taxed like tobacco at a federal, state, and local government level to the tune of around $130 billion a year.”

Reducing Housing Supply

Zorbas argued that the proposed changes to CGT and discretionary trusts would increase the tax burden on property businesses, which would in turn affect consumers and reduce housing supply.

“The housing challenge is a supply challenge, and these bills will cut new homes by 35 thousand [over 10 years] according to the government,” he said.

“A lot of it [the cost of building a house] goes into consolidated revenue and is evidence of a broken tax system, which should not be levying that incidence of taxation on people,” he said.

Asked about the ability of property investors who purchase new residential builds to choose between the existing 50 percent capital gains tax discount or the new arrangements, Zorbas called it a choice between “the dire and the diabolical.”

The Property Council, Master Builders Australia (MBA), and the Real Estate Institute of Australia have commissioned independent modelling which they say indicates that—even with the impact of the $2 billion  (US$1.4 billion) Local Infrastructure Fund—will see 8,742 fewer homes built over four years.

They are also concerned that the tax changes will occur before the fund is spent and the infrastructure is complete.

The modelling also found that rents will increase by $142 per year in the next financial year, rising to $477 per year by 2029–30. However, Treasury estimates suggest this would amount to less than $2 a week.

Moreover, it forecast that the tax reforms would reduce GDP by $864 million, cut construction output by $1.18 billion, and result in 3,854 fewer full-time equivalent construction jobs over four years.

Investment Strike Possible

Denita Wawn, CEO of the MBA, told the committee that the combined tax hikes “will stifle business and are likely to cause a private investment strike, leading to a significant decline in terms of economic capacity of our country.”

“These changes do not do anything to deliver on the federal government’s commitment to materially increase new housing supply potential, let alone support the government’s own target to deliver 1.2 million homes by mid 2029,” she said.

“Builders and developers have made investment decisions based on these policy settings that were taken to the last election by the federal government. Projects take many years in their planning and design, so many decisions will now be negatively impacted.”

Wawn also noted that all three associations were “incredulous and shocked” when Treasurer Jim Chalmers announced the changes in the federal budget.

“[We all] supported the housing accord of 1.2 million homes over five years. It was our intention, certainly at Master Builders, that we would be working collaboratively with all levels of government to focus on supply, because we know ... that we have a supply issue in this country,” she said.

“We are currently forecasting that we will fall short of that 1.2 million target by over 200,000 homes, so it was our anticipation that the budget would be focused on maximising the supply story, as opposed to, in part, stalling it.”

Both the MBA and the Housing Industry Association (HIA) claimed that there were drafting errors in the legislation, suggesting it had been rushed.

“The legislation isn’t properly done,“ HIA Managing Director Jocelyn Martin said. ”There are unknowns, and this is probably a tricky way of dealing with unknowns, and so, quite frankly, that’s not acceptable.

“If we were sitting here in our dream situation, we'd be saying we need a fulsome review of tax on housing in this country. That’s what we need, not this kind of little iterative changes that we call reform.”

The organisations asked that the Committee obtain the modelling used by Treasury to underpin the projections in the budget and make it publicly available.

“In the absence of any evidence that the package will increase housing supply, the status quo should be maintained, and the Bills should be opposed,” the HIA’s submission said.

Earlier in the day, several economists gave cautious approval to the new laws, which have faced widespread opposition from businesses. Despite the criticism, Chalmers has said he has no plans for significant changes to the bill.