Under the changes, the managed investment trust withholding tax rate will be halved from 30 per cent to 15 per cent in a bid to encourage new housing supply.

This will be in addition to the a $6.6 billion, 10-year plan announced in December in which a Labor government would pay $8500 a year to investors who build new homes, as long as they offer them at 20 per cent below market rent to low-and-middle income Australians.

This is designed to facilitate the construction of 250,000 homes.

Current investments to be exempt

Under the proposed negative gearing changes, all properties which are negatively geared before January 1 would not be affected. Any investments properties purchased after that date could only be negatively geared if they were new houses.

As for capital gains tax, the 50 per cent deduction for investors who sell an asset after holding it for a minimum 12 months will be halved to 25 per cent.

Again, investments entered into before January 1, 2020, will not be affected but those entered into afterwards will be subject to the new lower rate.

The existing CGT discount which applies to superannuation funds will not be affected, even if the super fund is started after January 1. The 50 per cent active asset reduction which applies to small business will aso be exempt.


The policies were first announced three years ago and Labor has come under renewed pressure in recent months to dump them amid a slowing housing market.

Some industry groups opposed to the changes are planning advertising campaigns during the election, and beyond if Labor wins.

Bowen to double down

But Labor is unperturbed, believing the policies will help increase housing affordability and drive new construction.

"We announced our reforms to negative gearing over three years ago. We’ve withstood the shrill scare campaigns and the apocalyptic warnings,'' Mr Bowen will say today.

"The political pundits postulated that negative gearing reform would be all too hard for any major political party, but we’ve tackled it and stuck with it, we've argued the case.

"We listen to evidence from independent voices such as the Government’s own financial systems inquiry, the International Monetary Fund or the independent Grattan Institute.

"Just last month the International Monetary Fund again endorsed reforms to negative gearing and the capital gains tax discount."


The two policies are budgeted to raise $2.9 billion in the four years to 2022-23 and $35.1 billion over a decade.

These numbers have been revised down from $3.25 billion and up from $32.45 since last year due to the new start date.

Plenty of time to adjust

With the election due on either May 11 or May 18, Mr Bowen will indicate today there is not enough time, if Labor wins, to undergo the necessary consultation, recall the Parliament, form a new government and try and pass the legislation before July 1.

"A January 1, 2020 start date allows for around seven months, a sufficient amount of time to get the legislation in place before the changes come into effect,'' he will say.

"That is what you'd expect from sensible fro a sensible and responsible incoming government.''

If Labor wins, it will have to seek the support of the Greens and a smaller Senate crossbench for the changes.

Of the 11 members of the current crossbenchers, just four will be guaranteed spots after the election because they are on six-year terms, These are Pauline Hanson, Cory Bernardi and the Centre Alliance's Rex Patrick and Stirling Griff.


Senator Hanson's One Nation may win another seat in Queensland.

Labor will need 39 votes to pass the legislation mean that as well as the Greens, it is likely to need at least two of the crossbenchers.

Senate will be a challenge

Late year, The Australian Financial Review asked the post-July 1 Senate crossbench for their views. Senator Bernardi and One Nation said they opposed the changes to negative gearing and CGT while Centre Alliance expressed a preference to limit the number of properties which could be geared, rather than limit the tax deduction to new homes.

Mr Bowen said Labor would have an overwhelming mandate for the policy if it won the election, given it had been announce so long ago.

The changes to be announced today to the Build-to-Rent scheme also unwind some limitations the current government placed on the scheme back in 2017.

Mr Bowen will say that while the negative gearing and CGT changes are designed to make housing more affordable, "we also understand there will always be a cohort of people who rely on rental accommodation''.

He says the Build-to-Rent scheme had worked successfully in comparable countries and should become a viable part of the Australian housing market.


The central benefit, he says, would be to provide long-term stable rental accommodation in desired locations close to transport and jobs.

In September 2017, then-treasurer Scott Morrison made a surprise announcement in which managed investment trusts would no longer be able to buy residential property other than affordable housing under build-to-rent.

Almost a year later, he backtracked but kept the tax rate at 30 per cent. Mr Bowen will drop the rate to 15 per cent if elected.

"We will do this by ensuring Build to Rent housing can be included within a Managed Investment Trust when they meet requirements that are currently in place for commercial property assets, basically where they are a passive investment held primarily for the purpose of deriving rent,'' he will say.

"This means that eligible Build-to- Rent investments will pay a 15 per cent tax rate, not the 30 per cent rate proposed by Scott Morrison, which would be double the rate paid for investments in shopping centres and office buildings."