Federal Treasurer Jim Chalmers is facing renewed pressure to overhaul Australia’s capital gains tax (CGT) discount, amid warnings that any change must be part of broader tax reform and concerns it could worsen the national rental crisis.

Reports the government is considering cutting the 50 per cent CGT discount on investment properties to 33 per cent or 25 per cent have drawn tentative support from economists, unions, the Greens and crossbench MPs.

However, the Australian Chamber of Commerce and Industry cautioned against what it described as isolated tax hikes.

“From a business point of view, we're very cautious about anything that involves a tax increase,” Australian Chamber of Commerce and Industry chief executive Andrew McKellar told AAP.

Mr McKellar said any reform should form part of a comprehensive package that reduces the overall tax burden and improves productivity, with the issue also framed as one of intergenerational equity.

Investor advocacy group Property Investment Professionals of Australia (PIPA) has warned that reducing the discount could accelerate investor sell-offs and tighten rental supply further.

PIPA’s 2025 Investor Sentiment Survey found 35 per cent of investors would stop investing in property if CGT were reduced to 25 per cent after 12 months of ownership. It also found 16.7 per cent of investors had sold at least one property in the year to August, up from 14.1 per cent the year before.

PIPA chair Cate Bakos said the data showed investors were already leaving the market.

“These numbers are not hypothetical because investors are already leaving,” Ms Bakos said.

“Our 2025 survey found that 16.7 per cent of investors had sold at least one property in the year to August – up from 14.1 per cent the year before and 12.1 per cent in 2023.”

Ms Bakos warned that any policy encouraging further investor exits could have “immediate and severe consequences for renters”, arguing that sales to owner-occupiers remove rental stock.

The warning comes as SQM Research data shows the national vacancy rate remains low at 1.4 per cent, including Perth at 0.7 per cent, Adelaide at 0.9 per cent and Hobart at 0.4 per cent.

Ms Bakos said, “When vacancy rates are this tight, removing investors from the market is economically reckless.”

PIPA also pointed to SQM figures showing advertised rents rising again in early January, with national rents up 2.4 per cent over 30 days and 5.8 per cent year-on-year.

Meanwhile, housing advocacy group Everybody’s Home has welcomed the prospect of reform, arguing investor tax concessions are worsening housing affordability.

“Tax breaks for property investors are making the housing crisis worse and everyday Australians are paying the price,” Everybody’s Home spokesperson Maiy Azize said.

The campaign argues the CGT discount and negative gearing cost taxpayers billions annually, with those savings better directed into public and community housing.

“The federal government spends billions more on property investor tax breaks than on providing rentals that people can actually afford,” Ms Azize said.

Calls for reform have been fuelled by Parliamentary Budget Office modelling, reported by The Australian, estimating the 50 per cent CGT discount will cost the federal budget $247.39 billion over the next decade, and had already cost $204.78 billion over its first 25 years from 1999 to June 2025.

A Senate committee, established last year with support from both the Coalition and the Greens, is currently examining the discount and is expected to report ahead of the May federal budget.

NSW Treasurer Daniel Mookhey has also advocated for an overhaul, The Australian reported, while Greens Treasury spokesman Nick McKim described reducing the discount as an “absolute no-brainer”.

Former Commonwealth Bank chief executive David Murray has cautioned that any changes should form part of broader tax reform, rather than a stand-alone budget measure.

With the government refusing to rule out changes, debate is expected to intensify as the May budget approaches.