Prime Minister Anthony Albanese has defended reversing his commitment not to alter negative gearing, arguing the government must respond to worsening housing inequality.
It comes ahead of the Federal budget which will be released on Tuesday night.
'The last year has been a year of delivery, but we also said that wasn't the limit of our ambition,' Albanese told ABC Radio National on Monday.
'You'd recall we certainly didn't say that we would cut fuel taxes, but we've done that in response to the circumstances which are there. We'll respond to the circumstances that are here now when it comes to intergenerational equity.'
Under the expected changes, current investors will be fully protected under generous grandfathering provisions, retaining negative gearing concessions for properties already held.
However, from 2027, only newly built homes that meet strict government criteria will be eligible for negative gearing.
Sweeping changes will be introduced immediately.
From Tuesday, investors purchasing established properties will no longer qualify for tax advantages under negative gearing, unless they already own suitable investment properties.
Anthony Albanese (pictured) defended the government's expected changes in the budget
Anyone who does not already own a negatively geared property will miss out on the tax benefit for established homes going forward.
Pressed on what had changed since the government pledged not to touch negative gearing, Albanese said the lack of progress in housing affordability had forced a rethink.
'How they are different is that they continue to be entrenched without reform, and that's the point,' he said.
'For a long period of time, young people have tried to save for a home.'
Albanese said the situation in housing and not remarkably improved in the previous 12 months.
'Another year has passed since the election, and not enough has changed, and so many people have had another year of missing out at auctions, of renting and paying someone else's mortgage, and too many young people are close to giving up on the opportunity of owning their own home.'
The Opposition has slammed the Albanese government over the changes, saying housing has 'collapsed' under their watch.
Shadow housing minister Andrew Bragg said the government's Housing Australia Future Fund, part of $80billion spending had delivered less housing than when the Coalition was in office.
The government has been slammed for breaking its election pledge on negative gearing (file)
'So over the course of these four years, they have only built on average 170,000 houses. Under the last coalition government, there was 200,000 houses being built every year on average,' he told reporters on Sunday.
'So the government have spent $80 billion of taxpayer funds to build 30,000 fewer houses each year.'
He accused the government of driving up housing costs for younger Australians through policy settings, including the uncapped 5 per cent deposit scheme, which has widely been criticised for lifting demand and increasing house prices.
'They have collapsed supply, and meanwhile they have really made things ugly for younger Australians by pump priming house prices at the entry level with their ridiculous non-means tested 5 per cent deposit scheme,' he said.