Negative gearing allows investors to use losses made on property investments to reduce their overall taxable income. About 1.3 million Australians use the concession to minimise their tax, so the major political parties have long been reluctant to wind it back. Credit:Andrew Meares But critics say negative gearing inflates house prices, locking many people out of the market, and is contributing to the Sydney and Melbourne property bubbles that Treasury boss John Fraser warned about last week. The budget office found that removing negative gearing for all asset classes for assets purchased on or after July 1, 2015 would increase revenue by almost $2.94 billion over the next four years. The extra revenue over the 10 years to 2024-25 would total about $42.5 billion. The changes would cost the government only about $18 million in administration over the same period, the budget office found found. The policy would be "grandfathered", meaning it would not affect existing investments.

Greens deputy leader Scott Ludlam says negative gearing reform is long overdue. "It's now out in the open that negative gearing needs to be dealt with," Senator Ludlam told Fairfax Media. "What we're going after is the fundamental unfairness of a concession like this. It's low-income taxpayers subsidising property investors." The biggest winners from negative gearing are typically the nation's high-income earners – more than half of people with negatively geared rental housing investments are in the top 10 per cent of taxpayers. But Senator Ludlam says it would be unfair to scrap negative gearing for existing investments because people have only been exploiting what is currently a perfectly legal element of the tax system. The Abbott government has ruled out any changes to negative gearing. Treasurer Joe Hockey says any cuts to the concession could force up rental costs, although that's a claim disputed by prominent economists.

Labor has not ruled out taking negative gearing changes to the next election. Shadow treasurer Chris Bowen has said while no government would abolish negative gearing totally, he has hinted there was room for reform. The topic is expected to be debated at the ALP National Conference next month. Senator Ludlam hopes the coalition also takes another look at the issue. "They change their minds almost routinely," he said. "Just because Mr Hockey ruled it out on one day doesn't mean he's not necessarily open to the possibility on another." The Greens want the extra revenue to be used to build new affordable rental accommodation for thousands of people who are homeless or stranded on social housing waiting lists. They say the money should directly fund the construction of 7000 homes for the homeless by 2020 at a cost of $1.12 billion, and 7500 new social housing dwellings over the next four years at a cost of $1.88 billion. That would include a target of high-quality but cheap prefabricated housing. The Greens party room signed off on the policy – the first released under new leader Richard Di Natale – last week.