Breaking Down the 2026-27 Federal Budget's Tax Changes

It's a big beast and I'm not going to dissect the whole thing. But let's call it what it is and focus on some of the glaring issues.

The 2026-27 Federal Budget restricts negative gearing to new builds. In isolation, this one is a net positive. It places an incentive directly where it is needed, to address supply. After this, it's all downhill.

It also replaces the 50% capital gains tax discount with inflation-adjusted indexation across all asset classes, not just houses, from 1 July 2027, subject to a 30% minimum tax on realised gains. The government frames this as a housing affordability reform. This argument falls over immediately once the conversation captures all asset classes and not just housing.

In my opinion, this is how tax incentives work. We want people to stop smoking, so we increase the taxes on cigarettes. We want people to not speed in their cars, so we tax them in the form of a fine when they speed. All of these are supposedly taxes aimed at influencing behaviour, where taxation is the disincentive.

So to that end, all existing investors are grandfathered in and exempt from the changes, and from here on in, we're increasing the tax at the point of sale on property, and all other asset classes, with the thought that this will make things fairer?

Taxing asset sales more heavily at the point of disposal is a structural disincentive to transact. In supply-constrained markets, this produces a lock-in effect: owners delay or forgo sales, compressing the stock available to buyers rather than expanding it. Commonwealth Bank economists project the combined changes will suppress house prices by 3 to 6% nationally, against an otherwise expected baseline, and raise approximately $20 billion in additional revenue over a decade. A lower price in a thin market is not access. It is a slightly smaller number attached to the same shortage.

Younger Australians did not turn to shares, ETFs, and managed funds out of preference for financial markets over houses. They did so because property had already been structurally priced beyond reach, and with excessive government stimulus, the 5% deposit scheme, acceleratingly so. The income to house price ratio now exceeds ten times annual earnings in major capital cities, compared with approximately 3.5 times in 1970.

ASX data from 2023 confirm the pattern directly: young investor participation in residential property remained essentially flat between 2020 and 2023, while holdings in Australian and international shares and ETFs increased materially across the same cohort.

Removing the CGT discount on all asset classes does not level the playing field. It removes the lower rungs from the only ladder still standing. Treasury's own numbers acknowledge that 83% of the current CGT discount accrues to the top 10% of income earners. That concentration is worth reforming. What is not defensible is a remedy that taxes the middle income investor who turned to shares precisely because they could not access the asset class the discount was designed to favour.

If all these measures are implemented in full, Australia is the only major OECD jurisdiction whose CGT simultaneously combines marginal rate taxation, inflation-adjusted real gains, and a 30% minimum floor. That floor alone exceeds the entire headline CGT rate in more than 25 countries, including the United Kingdom, Germany, and the United States. The way I see it, the major beneficiary of this package is government tax income, and they used an emotional headline, intergenerational equity, to create support for a budget that simply does not address it.