Negative gearing is now officially dead, buried and cremated in Jim Chalmers' Federal Budget. 

Unless you buy a newly built house or apartment you must have already own your negatively geared older property in order to benefit from the tax deduction. 

Future investors will be forced into buying new properties, if they also want to benefit from the tax break. 

If you're wondering if you are allowed to knock down an existing older property and build a new one, thereafter enjoying the benefits of negative gearing, the answer is a firm no. 

The new build needs to add to supply. 

A like-for like new build doesn't do that. If the block is subdivided, or turned into apartments, that's when the purchases that follow can be negatively geared.

Former Labor leader Bill Shorten might not have had a hand crafting this year's budget, but his legacy looms large. 

When Treasurer Jim Chalmers visited our office during the lock-up we asked him about some of the similarities between reforms in this year's budget at Shorten's ill-fated 2019 election manifesto. He told us 'I have a lot of time for Bill'. At the time Chalmers served as Shorten's shadow finance spokesman.

Chalmers also stressed the importance of new builds 'adding to supply' to qualify for negative gearing. 

And if you wondered just how the tax office is going to ensure compliance over such increased complexity, fear not, the budget includes funding for thousands of new Australian Tax Office workers that Chalmers confirmed to us is all part of the government's strategy to make sure these changes work.

For most Australians the changes to negative gearing are probably the most significant adjustment within the budget. 

Whether or not people invest in property, the aspiration of doing so has loomed large in Australia for many years now. Chalmers is now doing what Shorten hoped to do, but the Prime Minister specifically ruled it out before the last election. The adjustments coming are therefore an unarguable broken promise.

Don't panic if you already own a property 

The model Chalmers outlined in his 2026 budget includes abolishing negative gearing on existing properties and only allowing the tax deduction for new builds, whether we are talking about houses or units.

But before anyone who owns an already built unit or house starts to panic, don't. 

At least not insofar as your eligibility for a tax deduction goes. 

Labor is grandfathering that right for anyone who currents owns negatively geared properties. Just don't sell them and hope to do the same thing next time, unless you buy a new build.

The primary reason Chalmers is pursuing this change is to try and make it easier for new home buyers to enter the market. 

Labor claims that its changes to how and when people can negatively gear, alongside its changes to capital gains tax concessions, will support 75,000 additional owner-occupier dwellings over the next decade. 

Of course that figure is impossible to verify, even if there is a surge in home ownership. 

Proving that it is causal is nigh impossible, and the modeling that underpins the assertion wasn't included in the budget papers.

The truth is that Chalmers has long wanted to limit negative gearing, but what's interesting in this budget in the way he's gone about doing it. 

While it's probably no coincidence that the models resembles the one Shorten attempted to win an election arguing for, it is more complicated, and market distorting, than if Labor had simply restricted the number of properties taxpayers are allowed to negatively gear.

But that is the whole point so far as the government is concerned. It wants to distort the market, or as it likes to put it, turn it into an equal playing field between investors and home buyers. 

And it certainly will do that, for existing properties. 

Who would buy an existing property as an investment?! 

Who in their right mind would by an existing build as an investment with a financed loan if they can't negatively gear it, when they can purchase a newly built property and do so?

The government hopes that a surge in investor interest in new build purchases will result in more housing being squeezed into the market, hence addressing the housing shortfall crisis, and perhaps even moderating house price growth.

But that's where things get more complicated, and perhaps messier too. If houses don't keep going up in value at a fast enough rate to attract investors, whether negative gearing is or isn't possible becomes a redundant point. 

And there is every chance that, up to a certain price point at least, if investors are pushed out of the market to buy existing dwellings (because they won't be allowed to negatively gear their purchase) the prices of such properties also won't rise as fast as they used to.

You get the impression Chalmers would be happy with that outcome, although he doesn't want to say it out loud, or at least not too loudly, lest existing home owners saddled with sizeable mortgages start to panic. And I'm not just talking about investors.

There is also a legitimate query about what happens to anyone renting older apartments, for example, when their current landlords start selling the properties to realise their capital gain. 

New buyers are more likely to be home owners than investors, so where do the one time renters go? 

Some might be able to afford to rent brand new apartments investors continue to negatively gear, but they all won't necessarily be in that financial position. It can't be ruled out that the changes to negative gearing might carry the unintended consequence of making life even harder for lower socio-economic Australians who rent.

But give Chalmers credit where it's due. For starters he's doing something he believes in, and not to win a popularity contest. 

He believes housing affordability is a problem, and he believes perks for investors are too generous, to the detriment of new home buyers. 

And he's probably right about that, whether or not he's gone about addressing it in the right way.

The Treasurer also isn't pursuing his negative gearing changes as a tax grab, because the grandfathering provisions, alongside continuing to offer negative gearing on new builds, means that by the time the Treasury secures meaningful tax windfalls from the changes, Chalmers will be long gone. 

We're potentially talking decades rather than years.

The budget papers point out that last year 83 per cent of new investor loans were for existing properties rather than new builds. 

This policy change is all about changing that, and it surely will. But perhaps the more interesting data point will be what the changes do to overall investments in housing. 

Does the fact negative gearing will remain in new builds send those buying existing builds across, or just some such investors. 

Whereas many others shift their investments to other asset classes, or worst of all they invest overseas instead, including in properties abroad.

The law of unintended consequences is always part of the risk equation when unveiling a tax shift such as this, and no amount of modeling can say with certainty that perverse outcomes won't follow. 

But Chalmers is at least having a crack at a reform attempted by the first Labor leader to support his elevation onto the frontbench.