With this year’s budget, the Albanese government has delivered a suite of bold tax reforms aimed at improving Australia’s “intergenerational equity” – particularly young people’s access to home ownership.
The reception, however, has been mixed. Some groups have welcomed the government’s proposed changes to wind back generous concessions on capital gains income and negative gearing. In stark contrast, Opposition Leader Angus Taylor used his budget reply speech to call it an “assault on aspiration”, representing broken promises.
Proposed changes to the way capital gains are taxed have been a particular point of concern. The removal of the 50% capital gains tax discount has not been limited to investment properties – it will apply to other assets, such as shares, too.
That’s led some to warn the changes could actually backfire for young people, particularly those investing in shares to save for a housing deposit or build their wealth.
Separately, startup founders and investors have warned taxing capital gains more will make it less attractive to start or invest in a business in Australia, and harder to attract and retain talent by offering them shares.
So, are this budget’s tax changes really an “assault on aspiration”? The answer is nuanced. And although the government has announced these changes, the legislation hasn’t passed through parliament yet, and further changes could be made.
Building wealth
From July 1 2027, the federal government will abolish the current 50% tax discount that applies to capital gains on assets owned for at least 12 months.
Right now, if you sell such an asset, you only pay tax on 50% of the gain. This will be replaced with an indexation-based system that will only tax real capital gains (that is, after inflation).
On the same date, the government will also introduce a 30% minimum tax on income from capital gains (with exemptions for those receiving government income support).
Under the current settings, these are only taxed at an individual’s marginal income tax rate – which for some people, could be lower (0% on income from $0 to A$18,200, and 16% on income from $18,201 to $45,000).
Critics have argued the changes will hurt young people – especially those working part-time and taxed at those lower marginal tax rates – trying to build their wealth through shares. They’ll now face a 30% minimum tax on any gains.
Some caveats
But there’s important nuance here. Such a young person investing in shares will only be taxed on these capital gains when they sell the shares. If they sell them years down the line, their income may put them in a higher bracket anyway.
Under the new system, how much they pay will depend considerably on inflation over the period they’ve held the shares. If inflation has been high, they will pay correspondingly less tax in dollar terms (because they will have made less of a real gain) and vice versa.
For that reason, the average tax rate on capital gains is expected to increase (compared to the 50% discount). On Monday, Treasurer Jim Chalmers released government modelling suggesting this may only be a very modest change, from 19.3% to 21.4%. That’s because various other capital gains tax concessions (such as for small businesses) will remain in place.
For young people, superannuation is one avenue that still offers tax-advantaged ways to build wealth long-term. It can even help them invest to save for a housing deposit, through the first home super saver scheme.
Lukas Coch/AAP
Changes for startups and small businesses
Concerns the capital gains tax changes may negatively impact Australia’s startup scene may have some merit.
But the government has indicated it will consult on these changes, which may even result in some “carve-outs” and exceptions for the sector. This would recognise the fact that investing in these companies is often very risky – but can pay off if successful.
Various other measures announced in this budget could actually support startups and other small businesses.
Loss refundability reforms, for example, are a generous measure that will allow small businesses to offset losses made in one year against tax paid in the previous two years. This will give them a refund of some of the tax they paid.
At the moment, companies are only able to carry the losses they make forward to future years. These refunds can help them weather economic storms and growth periods.
Another helpful measure is that the $20,000 instant asset write-off for businesses will be made permanent. This write-off allows small businesses to immediately deduct the cost of buying certain assets, instead of having to deduct the cost over a number of years (known as depreciation).
And on top of this, the budget is expanding access to research and development tax incentives, and increasing investment limits for venture capital programs.
The verdict
While the 2026 budget is certainly ambitious, introducing significant changes across a range of areas, it is probably going too far to describe it as an “assault on aspiration”.
Certain investors, particularly those that make large capital gains in periods of low inflation, are likely to end up paying more tax than they otherwise would have.
This could include some young investors. But for young Australians, the opportunities to earn, save, start businesses and build wealth over time remain largely available.
