Labor has struck a deal with the Greens to change how housing investment and retirement savings are taxed. The package alters capital gains tax discounts and negative gearing rules — two tax breaks that make rental property investment cheaper — and restricts how self-managed superannuation funds can borrow to buy residential property.

For the Greens, this is a notable win. They've pushed for changes to these tax concessions for years, arguing they drive up housing prices by making property investment too attractive. Back in February 2024, they put both issues squarely on the negotiating table over Labor's Help to Buy scheme. By September, Labor was already signalling it would consider moving on them. So while the deal matters politically, it didn't arrive unannounced.

The Greens estimate these two tax breaks cost the budget around $157 billion over a decade — with capital gains tax discounts alone running to $60 billion over ten years. That's the Greens' own calculation, and the government will probably quibble with the exact figures. But everyone agrees they're among the biggest tax concessions in the budget.

The super borrowing piece

The other half of the deal targets self-managed super funds (SMSFs). Currently, these funds can borrow money to buy residential property through arrangements called limited recourse borrowing arrangements, or LRBAs. The government now plans to ban or severely restrict this practice.

This isn't a small corner of the superannuation system. LRBAs currently prop up roughly $28.9 billion in borrowing against about $75 billion in assets — a meaningful chunk of how Australians save for retirement. The property industry has responded sharply, with some calling the move "insanity."

Here's the practical problem: property developers say SMSF buyers make up as much as 30 per cent of apartment purchases in some markets. Cutting off LRBA-backed loans could gut pre-sales for apartment buildings right when the government is trying to build more homes. That's a real tension — the same budget package wants more homes built but is restricting one of the financing mechanisms that's historically fuelled apartment demand.

The superannuation argument for this change isn't new. The Financial System Inquiry back in 2014 recommended scrapping LRBAs from the super system. The logic is straightforward: borrowing inside a tax-advantaged vehicle amplifies risk, pushes super money disproportionately into housing, and distorts how investment capital gets allocated. What's different now is the politics — the Greens wanted housing tax changes, and Labor can frame the SMSF borrowing restrictions as a superannuation integrity measure rather than a tax squeeze.

The detail question

Here's where things get murky. "Changes to negative gearing" could mean almost anything — grandfathering existing arrangements while blocking new losses, scrapping it entirely, or something in between. The capital gains tax discount might drop from the current 50 per cent (for assets held over twelve months) to 25 or 33 per cent, without being abolished. Until the budget bills land, nobody knows exactly what's changing.

The Greens have extracted a real policy concession this time, not just a promise to think about something — that distinction matters in crossbench negotiations with Labor, where process commitments sometimes substitute for actual change. Two questions will determine whether this deal works: whether the numbers stack up the way the Greens claim, and whether choking off SMSF borrowing actually reduces apartment demand in a market already starved of supply.

The property industry will spend the next few weeks arguing LRBA curbs are self-defeating. The Greens will argue they're essential. Both sides will have a point. That's usually how these things shake out.