Labor has reached a deal with the Greens that delivers changes to capital gains tax concessions and negative gearing arrangements, alongside new restrictions on self-managed super funds borrowing to purchase residential property — a package that resolves one of the more stubborn negotiating standoffs of the parliamentary term.

The agreement hands the Greens a tangible win after successive election cycles of pressure on housing tax concessions. The party has long argued the CGT discount and negative gearing are structural drivers of housing unaffordability, and had flagged both as explicit negotiating demands as recently as February 2024, when they declared the concessions "firing line" issues in talks over Labor's Help to Buy bill. A September 2024 Greens media release had already flagged that Labor was "considering" movement on both — so while the outcome is politically significant, it did not arrive without warning.

The Greens have put a $157 billion price tag on the combined cost of negative gearing and CGT concessions over a decade, with CGT discounts alone estimated at $60 billion over ten years. Those figures are the party's own modelling, and the government will no doubt contest the precise numbers — but the order of magnitude has never seriously been disputed, and Treasury's tax expenditure statements have consistently placed both concessions among the largest in the Commonwealth budget.

The SMSF piece

The other side of the ledger is the borrowing restriction on SMSFs. Under the deal, the government will move to ban or significantly curtail the use of limited recourse borrowing arrangements — LRBAs — by self-managed funds for residential property purchases.

The SMSF sector is not small. LRBAs currently support around $28.9 billion in borrowing against approximately $75 billion in assets. That is a meaningful slice of the retirement savings system, and the industry reaction has been predictably sharp — "insanity" was one property sector description quoted in the Yahoo Finance report from 23 June.

The practical concern is on the development side. Developers have told the Australian Financial Review that SMSF buyers account for up to 30 per cent of apartment purchasers in some markets, and that cutting off LRBA-backed financing could hollow out pre-sales pipelines at exactly the moment the government is trying to accelerate housing supply. That is a genuine tension the government will need to manage — the same budget package is simultaneously trying to build more homes and restricting one of the financing mechanisms that has historically underpinned apartment demand.

The superannuation policy rationale has been on the table for years. The Financial System Inquiry under David Murray recommended removing LRBAs from the super system back in 2014. The argument — that leverage inside concessionally taxed vehicles amplifies risk, distorts asset allocation and concentrates super capital in residential property — has never gone away. What's changed is the political arithmetic: the Greens wanted housing tax reform, and restricting SMSF borrowing is a concession Labor can frame as superannuation integrity rather than a tax hike.

What it means in practice

The precise legislative form matters enormously here. "Changes to negative gearing" can mean anything from grandfathering existing arrangements while quarantining new losses, to full prospective abolition, to a softer cap. Similarly, the CGT discount could be reduced from the current 50 per cent for assets held over twelve months to 25 per cent or 33 per cent without being scrapped entirely. Until the budget bills are tabled, the devil is entirely in the detail.

What is clear is that the Greens have extracted a genuine policy concession rather than a process commitment — a distinction that has not always held in crossbench negotiations with this government. Whether the numbers pencil out the way the Greens claim, and whether the SMSF restrictions actually dampen apartment demand in a supply-constrained market, are the two live empirical questions sitting under this deal.

The property industry will spend the next several weeks making the case that LRBA curbs are counterproductive. The Greens will spend those same weeks arguing the reverse. Both will be partly right. That's usually how these things go.