Tonight's Federal Budget Is Shaking up Negative Gearing and Capital Gains Tax — And First-Home Buyers Might (Finally) Catch a Break at Auction
Tonight's federal budget is set to confirm the biggest changes to negative gearing and the capital gains tax discount in decades, and they're aimed at the investors who've been outbidding first-home buyers at auction.
The dream of home ownership has been quietly slipping out of reach for a generation of Australians, and tonight's federal budget is set to do something about it. Ahead of Treasurer Jim Chalmers' speech at 7.30pm AEST, the Albanese government has confirmed it'll overhaul negative gearing and the capital gains tax (CGT) discount — two tax breaks that have shaped the Australian property market for more than two decades, and that critics say have helped lock younger Australians out.
According to the ABC, the changes will reform the rules so the tax system encourages investment that increases the supply of new housing, rather than incentivising investors to pour money into pre-existing dwellings. Reporting indicates negative gearing will be limited to newly built homes, while the CGT discount is set to revert to a pre-1999 indexation model. Existing property investors will reportedly be "grandfathered" — meaning current arrangements stay in place — and the full transition details are due tonight.
Speaking to reporters in Canberra this morning, Chalmers said the case for change was hard to ignore. "The status quo in the housing market and in the tax system is not working for too many Australians," he said. "Too many people are locked out of the housing market." Prime Minister Anthony Albanese, appearing on Adelaide's Nova breakfast radio, called it a "big reform budget", adding that "we know the key to housing is supply which is why reform is focused on that but it's also about giving a fair crack."
So what does it actually mean if you're trying to buy your first home? Senior economist Saul Eslake told the Nine Network's Today show that the changes weren't a "magic bullet" but could "remove some of the competition" young homebuyers are facing. Eslake said 80 percent of lending to property investors currently goes to existing homes, where investors are "effectively outbidding homebuyers and therefore forcing them to rent." A Parliamentary Budget Office analysis cited by the ABC found 80 percent of CGT discount benefits flow to the top 10 percent of salary earners, while 60 percent of negative gearing benefits go to the top 20 percent.
Not everyone is convinced. At a news conference reported by the Guardian, Shadow Treasurer Tim Wilson said "the Australian people have woken up to the new taxes on the self-starters of this nation", accusing the government of breaking its election promise not to touch negative gearing.
The budget is also expected to include $2 billion for councils and state utility companies to deliver the roads, pipelines and wires needed to support construction of 65,000 new homes over a decade.
The 2026 federal budget will be handed down in full at 7.30pm AEST tonight.
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