Whilst the Budget contains a mix of welcome, long sought reforms that HIA championed, the major tax changes to Negative Gearing and Capital Gains Tax risk counteracting those gains.

The Government’s own Budget papers admit that changes to negative gearing and capital gains tax will reduce the supply of new housing by around 35,000 homes over the next decade.

From an industry perspective, the Budget can best be described as constructive on productivity and delivery, but conflicting on housing investment incentives – akin to right hand giving and left hand taking.

Right Hand: Positive Moves to Support Housing Delivery

HIA welcomes a number of measures that directly address long standing barriers to getting homes built sooner, cheaper and with a stronger workforce.

Free Access to Australian Standards

The decision to make all mandatory Australian Standards free is a significant win for builders and trades:

• Reduces compliance costs for small and medium construction businesses
• Improves consistency, safety and quality outcomes
• Removes a long criticised barrier to productivity

This reform directly supports better use of the National Construction Code and modern building practices.

Infrastructure to Get Homes Shovel Ready

The Budget invests billions in housing enabling infrastructure such as water, sewerage and roads to unlock tens of thousands of new homes:

• Infrastructure funding aimed at accelerating housing approvals
• Incentives for states and councils to make land build ready sooner
• Stronger focus on nationally consistent planning and construction rules

These measures acknowledge that planning delays and infrastructure gaps — not industry capacity — are among the biggest constraints on housing supply.

Apprentices, Skills and Workforce Support

The Budget contains targeted investments to ease skilled labour shortages:

• Faster skills assessments and licensing for overseas trades
• Recognition of Prior Learning and gap training for experienced local workers

These measures should help expand the construction workforce and improve entry times into the industry.

What’s Concerning

Whilst these are positive measures, we remain concerned that:

• Employer incentive payments are reduced from $5,000 to $4,000
• Incentives are now limited to small and medium sized enterprises (SMEs) and Group Training Organisations (GTOs)
• Large residential building employers will no longer be eligible for direct apprentice incentives

HIA is concerned that reducing incentives risks discouraging apprentice uptake, particularly for employers already training at scale.

Environmental Approvals (EPBC Reform)

The Budget commits more than $500 million to implement historic reforms to Australia’s environmental laws under the Environment Protection and Biodiversity Conservation (EPBC) framework.

Key elements include:

• Streamlining environmental assessment and approval processes for housing and infrastructure
• Reducing duplication between Commonwealth and state approvals
• Improving certainty and timeliness while maintaining environmental protections
• $47.6 million to progress bilateral agreements with states and territories, enabling states to conduct approvals on the Commonwealth’s behalf

Importantly, the Budget also includes $105 million dedicated to housing related EPBC reform, including investment in:

• AI enabled digital tools to improve the speed, quality and consistency of environmental assessments and approvals
• Digital systems to assist regulators and proponents in navigating EPBC requirements more efficiently
• Data driven decision making to reduce delays for compliant housing and infrastructure projects
  HIA welcomes this investment, noting that faster, clearer and less duplicative environmental approvals are critical to unlocking housing supply and infrastructure investment, particularly in growth areas.

Small Business Support

Builders and trades will also benefit from broader business measures, including:

• Making the $20,000 instant asset write off permanent to support more investment in tools and equipment
• Cash flow support through loss carry back provisions
• Reduced compliance costs for everyday business operations

For many residential builders, these measures directly improve certainty and financial resilience.

Industrial Relations and Safety Measures

CFMEU Administration

The Budget provides important funding including:

• $5.3 million over two years from 2026–27 to continue Commonwealth support for the Administrator of the Construction, Forestry and Maritime Employees Union (CFMEU)

This funding continues the Government’s intervention aimed at restoring governance and compliance within the union. HIA notes that effective, transparent administration is essential to improving confidence, accountability and stability across the construction sector.

WHS Accreditation Scheme Support

The Budget also includes:

• $4.6 million in 2026–27 to continue targeted assistance to fast track accreditation of residential builders under the Work Health and Safety Accreditation Scheme under the HAFF

HIA welcomes continued support for builders seeking accreditation, noting that accreditation assists builders to access government and major projects and streamlined accreditation that can reduce unnecessary delay and cost for compliant businesses.

Left Hand: Housing Investment Changes that Undermine Confidence

Against these positive reforms, the Budget also proposes fundamental changes to housing taxation that risk dampening private investment — a key driver of housing supply.

Negative Gearing Limited to New Builds

From 1 July 2027:

• Negative gearing will be limited to new residential construction only
• Losses from established dwellings can no longer be offset against other income
• While losses can be carried forward, the policy represents a major shift in investment settings
  Although existing investors are grandfathered, the changes reduce long term certainty for future investors.

Capital Gains Tax Changes back to 1999 Model

The Budget also resets CGT arrangements:

• Replacement of the 50% discount with cost base indexation model (1999 model) 
• Transitional arrangements apply, but settings are materially less attractive for future investment
• New housing receives partial exemptions, creating added complexity

Why This Matters

Private investors play a critical role in:

• Funding new housing construction and supporting rental supply across all market segments
• Underpinning housing feasibility, particularly in marginal projects like apartments and medium density housing.

While the Government estimates only a modest impact on supply, even small reductions in investor confidence can have disproportionate impacts in an already undersupplied market.

A Mixed Message on Housing

Taken together, the Budget sends mixed signals, on one hand, government recognises that productivity, infrastructure, skills and regulation are essential to delivering more homes.

On the other, it introduces tax changes that weaken investment incentives at exactly the time Australia needs more private capital in housing.

As population growth continues and housing demand remains elevated, the industry needs policy settings that align investment incentives with supply objectives, not work against them.

HIA remains concerned that changes to negative gearing and capital gains tax risk undermining housing supply, particularly rental housing, and offsetting the benefits of otherwise positive reforms.

HIA will continue to engage with Government to ensure housing policy is coherent, balanced and focused on delivering the homes Australians need.

For more information please contact: