Labor’s controversial negative gearing, CGT reforms pass into law after Greens deal

Labor’s sweeping reform to housing investor tax benefits have become law after being rammed through the House of Representatives.

The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed the Senate shortly after 2pm on Thursday, having flown through the lower house – where Labor has a sweeping majority – earlier this month.

However, Labor required support from the Coalition or the crossbench to pass the reforms – the first tranche of tax-related changes – in the upper house.

The Bill passed 35 to 25 with an amendment from the government and one from the Greens.

Its passage was met with cheers from the Senate chamber.

The Bill returned to the lower house following question time on Thursday.

The reforms passed 90 to 47, while the amendments – including those agreed to in a deal with the Greens – were passed 98 to 39.

The vote was again met with cheers from the chamber.

Liberal MP Dan Tehan, in a fiery spray, immediately moved to censure Anthony Albanese over the 2026-27 budget.

More than a dozen amendments – including amendments to amendments – were voted down in the Senate following a 1.30pm guillotine, which forces a vote on a Bill before debate is finalised.

Liberal senator Claire Chandler had moved to suspend standing orders to continue debate on the reforms, and its many opposition and crossbench-proposed amendments.

“We are being asked to consider complex legislation, deal with 20 amendments, and we’re still receiving basic answers as the debate is already underway,” she said.

“This is the guillotine in action and this chamber should not accept it.”

Speaking earlier, One Nation leader Pauline Hanson called the reforms a “tax grab” to prop up government spending.

“This is nothing but a scam,” she said.

“There’s no aspiration whatsoever for those future generations.

“Most of the investments in Australia are coming from those (in) the police, nursing, paramedics, these sort of people who have an opportunity to invest for their future, heaven knows how the hell they’re going to support themselves, because I can’t see them getting age pension because you won’t have the money out of this government.”

Amendments put forward by One Nation, the Coalition, and Senator Pocock were knocked back.

The Greens, however, did support the Bill, ensuring its passage through the upper house.

Earlier this week, the party said they would support the Bill in a deal which saw an amendment introduced to close a so-called self-managed super fund loophole, and to extend a parliamentary inquiry into reforms to the NDIS scheme.

The Bill also includes the government’s $1000 instant tax deduction and the $250 Working Australians Tax Offset, which were announced in the 2026-27 budget.

Anthony Albanese and Treasurer Jim Chalmers have staunchly defended backflipping on a pre-election commitment not to change the capital gains tax rebate – which will be slashed for housing and other assets – and negative gearing, which will be grandfathered.

Earlier this month, Mr Chalmers said the government would amend the Bill to rollback ministerial discretion.

‘Widows tax’ removed

An amendment put forward by independent Canberra senator David Pocock, which sought to ensure in circumstances where a couple owned a property that was being negatively geared and one partner died, the transfer in ownership would not reset and that it could continue to be negatively geared, was withdrawn.

Finance Minister Katy Gallagher said the government was “aware of the issues”.

“Some of the issues that Senator Pocock is raising around grandfathering and shared ownership, and we were working through them in the usual way,” she said.

“We intend to address these, the arrangements for jointly owned assets in circumstances like inheritance or divorce in subsequent legislation.”

Senator Pocock, in withdrawing the amendment, said that it was “not ideal” and that he had “to take the government’s commitment in good faith”.

“I do want to say, though, as a crossbencher, that the government’s language is a little bit disappointing,” he said.

He continued: “These amendments do go to fairness and also ensuring that this legislation doesn’t disadvantage women who … statistically outlive us men, but have less superannuation savings.”

Senator Gallagher shot back that while she could “take your criticism”, the issues were not raised at a crossbencher briefing on Wednesday.

Earlier, Senator Gallagher defended the government’s approach to introducing multiple tranches of tax-related legislation.

“There are already a number of issues that the Treasurer is managing consulting on around start-ups and the like. We’ve got some other amendments, that we will be able to do,” she said.

“We expect there will be issues that we will work through and bring back to this parliament in a second tranche of legislation, and it’s absolutely appropriate that we do that.

“There will be complex interactions of tax law that will require amendment pass through the second tranche of legislation … this is the essential architecture legislation.”

Senator Gallagher revealed only 15 per cent of the $3.6bn in revenue expected to be generated over forward estimates from the changes would be from changes to the capital gains tax.

The remaining 85 per cent would be from changes to negative gearing.

Speaking earlier on the reforms and proposed amendments, Liberal senator Claire Chandler – who supported an “off ramp” with Senator Pocock to send the CGT and negative gearing changes to a further inquiry – said there were questions yet to be answered about the impact of the reforms.

“Capital gains tax is not some separate tax in isolation. It is in effect another layer of income tax,” she said.

“Under these changes, Australians will pay tax when they earn their income, and then again, and then again if they take the risk to invest and build something more.”