Labor announces major changes to negative gearing and CGT

In Short:
– Jim Chalmers announced changes to negative gearing and capital gains tax, breaking pre-election promises.
– New rules restrict negative gearing to new builds, aiming to support first home buyers and reduce house prices.

Treasurer Jim Chalmers has announced changes to negative gearing and capital gains tax (CGT), breaking the government’s pre-election promises.The 2026-27 federal budget confirms the elimination of the 50 per cent CGT discount, implementing cost base indexation and a 30 per cent minimum tax rate.

Budget changes confirmed

Under the new rules, negative gearing will be restricted to new residential builds and grandfathered for existing landlords from 7.30 pm on May 12, 2026.

Chalmers stated that the intent behind these measures is to balance opportunities for workers and first home buyers.

Critics argue that these changes hinder younger generations from the wealth creation benefits older Australians have enjoyed.

The government claims these tax changes will result in a 2 per cent reduction in house prices.

Initial Treasury modelling indicates that prospective buyers could save about $19,000 on median-priced homes.

Starting July 2028, a 30 per cent minimum tax will also be applied to discretionary trusts.

The government aims to generate $3.6 billion over five years from negative gearing and CGT adjustments.

Revenue from taxing discretionary trusts is expected to be $4.5 billion over five years.

Chalmers has denied that the government misled voters regarding these changes before the election.

He indicated that the reforms are a necessary response to housing and tax pressures that prevent access to home ownership.

These initiatives aim to support an additional 75,000 first home buyers over the next decade.

Opposition voices remain sceptical, concerned that removing concessions disproportionately affects younger Australians.

Deputy Liberal leader Jane Hume raised concerns about the long-term effects of increasing taxes on investments.