Fresh Australian Taxation Office (ATO) data has reignited debate over whether Australia’s property tax system is offering generous concessions to wealthy offshore investors at the same time local buyers face tighter rules under the Albanese government’s housing reforms.

According to the latest taxation figures, more than 34,000 non-resident taxpayers claimed a combined $473 million in net rental losses during the 2023-24 financial year. Those losses can reduce taxable Australian income and, in some circumstances, ultimately lower capital gains tax liabilities when investment properties are sold.

The figures have drawn attention because they emerge only weeks after sweeping changes to Australia’s negative gearing and capital gains tax (CGT) system were announced in the 2026 Federal Budget—changes that largely affect domestic investors while leaving existing arrangements for foreign investors broadly intact.

Over the past decade, ATO data shows non-resident taxpayers reported approximately $35 billion in rental losses. During the same period they also claimed around $68.6 billion in interest deductions, $10.5 billion in capital works deductions and roughly $65 billion in other rental-related deductions, taking total deductions connected with rental property to more than $175 billion.

While these deductions do not automatically translate into tax refunds, they can significantly reduce taxable income generated from Australian property investments.

Under Australia’s tax rules, rental property owners may deduct eligible expenses—including loan interest, maintenance, depreciation and other allowable costs—from rental income. When deductible expenses exceed rental income, a net rental loss arises, commonly known as negative gearing. The Australian Taxation Office allows eligible taxpayers to claim these losses subject to the applicable tax rules.

The latest numbers suggest the scale of offshore participation remains significant despite years of tightening foreign investment rules.

Separate ATO records indicate investors from the People’s Republic of China remain the largest foreign owners of Australian residential property. Including Hong Kong, more than 25,000 residential properties acquired since 2016 remain under offshore ownership. Singapore, Malaysia and Japan follow as the next largest investor groups.

The figures have prompted renewed questions about whether foreign investors are benefiting from concessions that many Australian buyers will no longer enjoy once the government’s tax reforms take full effect.

From 1 July 2027, investors purchasing established residential properties after Budget night will no longer be able to offset rental losses against wage income. Instead, those losses will generally be quarantined and carried forward to offset future residential property income or capital gains. Investors purchasing newly built homes continue to receive full negative gearing benefits because the policy is designed to encourage additional housing supply. Existing investment properties held before the Budget announcement are grandfathered under the previous rules.

Tax Institute tax counsel John Storey argues the reforms fall most heavily on aspiring Australian investors rather than the wealthiest international buyers.

He says the changes are most relevant to Australians seeking to build wealth through a first investment property, including tradespeople and young professionals who traditionally used negative gearing as part of a long-term investment strategy.

By contrast, many large offshore investors already operate under different tax settings, particularly following earlier reforms that removed access to Australia’s capital gains tax discount for most foreign residents more than a decade ago.

That distinction has become central to the current political debate.

Critics argue the optics are difficult at a time when housing affordability has become one of Australia’s biggest economic challenges.

Property Investment Professionals of Australia chair Cate Bakos says many younger Australians hoping to enter the property market through “rentvesting”—buying an investment property while continuing to rent elsewhere—may feel disadvantaged when they see foreign investors unaffected by the latest domestic reforms.

Australian Bureau of Statistics data suggests fewer than 8,300 Australians purchased an investment property as their first home during the same financial year in which more than 34,000 non-residents reported rental losses.

Supporters of the current system, however, argue that focusing solely on tax concessions overlooks Australia’s chronic shortage of housing supply.

Real Estate Institute of Australia president Jacob Caine says foreign investment continues to play an important role in financing new housing developments, particularly because overseas buyers are generally restricted to purchasing newly built dwellings rather than established homes.

He argues Australia’s housing market functions as an interconnected ecosystem in which construction activity depends on both domestic and international investment capital.

Reducing incentives for foreign investors, supporters say, could discourage investment in new developments at precisely the time governments are attempting to accelerate home construction nationwide.

The housing supply challenge has become increasingly prominent across Australia, with governments struggling to meet ambitious housing targets while population growth and migration continue placing pressure on rental markets.

Industry groups argue that limiting foreign participation further could make it even harder to finance large apartment projects that rely on substantial upfront investment.

Others remain unconvinced, questioning whether tax concessions should continue flowing to overseas investors while Australians face increasingly difficult pathways into home ownership.

The Albanese Government has previously tightened rules affecting foreign investors. In 2012, foreign residents lost access to Australia’s capital gains tax discount. More recently, legislation has expanded the range of Australian assets subject to capital gains tax for foreign owners, although many other asset classes remain outside those rules.

The government also recently amended proposed legislation after concerns were raised that some tax changes could apply retrospectively to overseas investors, potentially creating unexpected liabilities for gains earned under previous rules. The amendment was welcomed by tax professionals who argued retrospective taxation could undermine confidence in Australia’s investment framework.

Property Investor Council of Australia chair Ben Kingsley sees one encouraging aspect within the ATO figures.

He notes that the rental loss data indicates many foreign-owned residential properties are being actively rented to tenants rather than left vacant, meaning they are contributing to Australia’s rental housing supply.

Kingsley argues Australia benefits from investment that increases housing stock and cautions against introducing additional restrictions that could discourage capital flowing into residential development.

Even so, he believes future policymaking would benefit from greater transparency.

The current ATO statistics combine residential and commercial property data in several categories, making it difficult to determine exactly how much of the reported deductions relate specifically to housing. More detailed reporting, industry groups say, would allow governments to better assess whether existing tax settings are achieving their intended policy objectives.

The broader debate reflects competing priorities confronting policymakers.

On one side sits the objective of improving housing affordability for Australian households by limiting tax advantages that critics argue inflate investor demand. On the other is the need to attract sufficient capital to build new homes quickly enough to meet growing demand.

The 2026 Budget reforms sought to strike that balance by directing future negative gearing benefits toward newly built homes while preserving existing arrangements for current investors and continuing to encourage additional housing supply. Whether that balance proves politically sustainable may depend on how Australia’s housing affordability crisis evolves over the coming years.