Federal Opposition Leader Bill Shorten has unveiled plans to change negative gearing rules for property purchases, in a move touted to "put the great Australian dream back within reach for the middle and working class".

Key points: Labor government would restrict negative gearing to "newly constructed homes"

Labor government would restrict negative gearing to "newly constructed homes" Capital gains tax discount reduced from 50 per cent to 25 per cent

Capital gains tax discount reduced from 50 per cent to 25 per cent Both measures would come into force from July 2017

Both measures would come into force from July 2017 All existing investments under the scheme would be fully "grandfathered" and protected against changes

With just months to go until a federal election is called, Mr Shorten used his speech to the NSW ALP conference to rally the party faithful for the battle ahead.

He said if Labor wins the election, from July next year negative gearing would only be available on newly-constructed homes.

The changes under a Shorten government would not affect the tax arrangements for investment properties purchased before July 2017.

Under costings released from the Parliamentary Budget Office, the measures could save the budget $32.1 billion over 10 years once they come into force.

Mr Shorten said the changes would foster a fair tax system, which supported a strong budget and growing economy.

"We're doing this because 30 years ago, houses cost around 3.2 times average income — today it's 6.5 times average income," Mr Shorten said.

"Labor will help level the playing field for first home buyers competing with investors and we will put the great Australian dream back within the reach of the working and middle-class Australians who have been priced out of the housing market for too long.

"Under a Labor Government, the family home will always be 100 per cent capital gains tax-free and these two reforms that we announce today will save $32.1 billion and help put fairness back into the housing market."

'Mum and dad investors' will keep deductibility

A Labor Government would also reduce capital gains discounts from 50 per cent to 25 per cent

"It cannot be rationally argued anything else but with a capital gains tax subsidy of 50 per cent, that the whole system is accessibly distorted and overly generous in favour of income from capital instead of income from earnings," Mr Shorten said.

Mr Shorten's announcement was met with a roaring round of applause as he spruiked the benefits of the changes.

"We will grandfather existing arrangements for those properties so that investors who have invested under the current tax law will not be disadvantaged by the change and a prospective change," he said.

"Let me repeat this before the Liberals run their scare campaign, because they think tax reform is putting a tax on you, not their mates at the big end of town.

"Mum and dad investors who have a house or apartment that is negatively geared right now will keep the deductibility, but after 1 July 2017, negative gearing can only be accessed for new houses and to improve the efficiency and fairness of our tax system."