Labor's tax changes to pass Senate with Greens' support after deal on SMSFs

Labor's changes to negative gearing and capital gains tax will pass the Senate with support from the Greens after the two parties cut a deal that stops self-managed super funds from borrowing to purchase housing.

An inquiry into the federal government's proposed overhaul of the National Disability Insurance Scheme (NDIS) has also been extended by eight weeks with a new reporting date of August 14, according to details of the agreement announced by the Greens today.

Prime Minister Anthony Albanese confirmed Labor would back amendments to its tax bill to prevent people from using SMSFs as a vehicle to borrow money and invest in residential properties.

"These arrangements constitute less than one per cent of total residential property borrowing and less than half a per cent of new residential borrowing each year," Mr Albanese said in a statement.

He said there would be no change to the tax arrangements for superannuation and no impact on existing SMSF borrowing.

Australians would still be able to invest in property through their SMSF, however they would not be able to borrow money to do so.

Deal ends self-managed super funds borrowing to buy housing

The Greens said the SMSF change would be "prospective" meaning contracts signed before the date of commencement are protected, including with a 45-day period after the amendments are signed into law for arrangements already in train.

Superannuation funds are broadly prevented from borrowing to purchase assets, but in 2011, self-managed funds were given an exemption that enabled them to do so when buying single assets.

Despite agreeing to support Labor's bill, Greens leader Senator Larissa Waters said it still did not go far enough to help Australians trying to purchase their own home.

"Ending rather than grandfathering these tax breaks today would have helped renters get into a home of their own," she said.

Greens economic justice spokesman Senator Nick McKim said Labor had missed a "generational opportunity" though he called the reforms a "small step in the right direction".

"The changes we have secured means that there will be fewer wealthy property investors turning up to auctions and outbidding renters who want to buy their first home," he said.

The tax bill, which is opposed by the Coalition, is expected to be passed in the Senate on Thursday.

Greens will continue to fight NDIS bill despite amendments

Labor had originally hoped to pass both the tax changes and NDIS bill before the parliament rises for the winter break in July.

But the latter would now not face the Senate until at least mid-August after a longer inquiry into the proposed changes expected to cut the cost of the NDIS by $37.8 billion over the next four years.

Labor and the Greens have agreed to amendments that would limit ministerial powers to impose cuts to people's support budgets and increase transparency around automated decision-making.

There would also be "greater protections" for disabled people by ensuring they cannot be "forced" to undergo harmful restrictive practices to gain access to the NDIS.

Greens disability spokesman Senator Jordan Steele-John said the party would "continue to fight night and day" against the NDIS changes more broadly.

Not the first changes to Labor's tax bill

Under Labor's original tax proposal, the 50 per cent CGT discount would be replaced with a model that instead reduced the tax in line with inflation for all assets.

The change also includes a 30 per cent minimum CGT rate, designed to prevent people from waiting until they are in a low- or no-income year to sell.

Following consultation, Labor backed down on several aspects of the proposal, including expanding the number of small businesses eligible for CGT exemptions.

The threshold for businesses able to access concessions like an extra 50 per cent CGT discount has been lifted from companies with an annual turnover of $2 million to now $10 million.

Labor also signalled the founders of "genuinely innovative" startups with very low or zero cost bases, along with their early investors and employees paid with shares in the business, would be able to stick with the existing 50 per cent CGT discount.

Separate to the tax legislation, the government also announced all testamentary trusts used to manage the income paid to beneficiaries of a deceased estate would be exempted from a proposed 30 per cent minimum tax rate on discretionary trusts.

Mr Chalmers said last week the planned changes would collectively cost the budget about $475 million over the next four years.