Prime Minister Malcolm Turnbull has warned Labor's plan to restrict negative gearing would distort the housing market, but he is leaving open the option of his Government making some changes to the rules.

Key points: Scott Morrison to announce tax break plans on Wednesday

Scott Morrison to announce tax break plans on Wednesday Housing Association worried changing tax breaks will reduce investment

Housing Association worried changing tax breaks will reduce investment Chris Bowen says negative gearing needs to expand housing supply

Chris Bowen says negative gearing needs to expand housing supply Council of Social Services says sentiment on negative gearing has shifted

The Government's tax plans are likely to become clearer on Wednesday, when Treasurer Scott Morrison addresses the National Press Club.

Mr Morrison has been leaving clues about the changes he wants to make to tax breaks for Australians who invest in property.

He has attacked Labor's policy — under which only new properties would be able to be negatively geared after a proposed 2017 introduction — saying everyday mum-and-dad investors would be hurt.

He told 2GB radio this morning that two-thirds of people are taking advantage of negative gearing have a taxable income less than $80,000, while 70 per cent of people only negatively gear one property.

"[Shadow treasurer] Chris Bowen thinks everyone who's on negative gearing is on a rort," he said.

"He thinks they're big property barons and you've got to go and tax them and slam.

"Well, for most middle-income people it is the one chance they've got to build some wealth."

Mr Turnbull today confirmed the Government was not ruling out changes to negative gearing, telling media that the Government was looking a range of issues in taxation.

Mr Turnbull said that Labor's proposal raises relatively little money in the near term and "doesn't address the big deficit problem".

"It's not a well-designed policy, if I can put it that way, and it doesn't provide any budgetary relief, at least any time soon," he said.

The debate has raised concerns in the residential building industry.

Grahame Wolfe from the Housing Industry Association is worried tinkering with tax breaks would reduce investment in housing.

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"In that market where we're seeing the potential for housing activity to slow down, what we don't want to see are distortionary effects in the tax system that might artificially reduce that demand for new housing even more so," he said.

"It is housing — new housing construction — that has been leading the economy, maintaining a good healthy supply of jobs, and also contributing quite significantly to the country's GDP."

Mr Wolfe said reducing investment in housing would cut supply, driving up prices and rents.

"Now before we do anything to negative gearing, capital gains tax, or any other changes to the tax system, we need to look at housing supply and boost housing supply," he said.

'93pc of negative gearing goes to existing properties'

But Mr Bowen has dismissed such criticisms.

Mr Bowen told the ABC while there was nothing wrong with negative gearing, it needed to work to expand housing supply.

"The proponents of the current arrangements say that negative gearing encourages supply – that is not true," he said.

"93 per cent of negative gearing goes to existing properties."

Mr Bowen also dismissed the argument that lower income earners, or "mum and dad investors", would be negatively impacted by the proposed changes.

"50 per cent of the benefit of negative gearing goes to the top 20 per cent of income earners," he said.

"What some people do, and frankly it is misleading, is take post-tax income. They say 'these people are on low incomes' – that's after they've negatively geared. They've reduced their taxable income by negative gearing."

Figures compiled by the Reserve Bank show that investment housing loans were more than twice as common amongst the top fifth of highest-earning households than amongst any other income group.

The Reserve Bank has previously noted that 60 per cent of investment housing debt is held by the top fifth of income earners.

'Public sentiment has shifted'

The Australian Council of Social Services wants a crackdown on negative gearing for all investors, including those on average incomes.

Chief executive Cassandra Goldie said smaller investors often bought and sold to chase capital gains tax discounts, making life difficult for renters.

"We've got people who are often being evicted at very short notice," she said.

"I mean there's investment properties [being bought and sold] because the small owner can't carry the risk.

"We want to see a change hopefully for the long term, which enables us to get big investors involved in real estate or rental properties, so that there is more stability and we're not just chasing the hope of a capital gain … which has very devastating impacts on the people that are renting."

Ms Goldie said she wanted an open public debate with all options on the table.

"Public sentiment on this has shifted," she said. "I think people — even those who are doing well out of investing in existing real estate — know it is at the expense of generations coming through, those that are locked out of the housing market.

"And I do believe that now the public is very ready for this kind of reform."