Treasurer Jim Chalmers dismisses budget’s ‘near-term political cost’ as peak body warns of long-term tax pain
The Albanese Government is facing backlash for proposed reforms it says the country needs to fix intergenerational inequity.
Labor can withstand the “near-term political cost” of the 2026 federal budget if it means fighting intergenerational inequity, Treasurer Jim Chalmers says as a leading finance peak body warns younger investors could pay tens of thousands more in tax over the next two decades.
Fronting an investors forum in Sydney on Tuesday, Mr Chalmers said the government wanted “to make sure we get these longer-term settings right” on capital gains, trusts and negative gearing.
“We’ve deliberately decided to take on some of these difficult economic reforms to seek the economic benefit and the intergenerational benefit, even though it has come at a near-term political cost for the government,” he told the Bloomberg Forum for Investment Managers.
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By continuing you agree to our Terms and Privacy Policy.Under current rules, investors get a 50 per cent discount on an asset they buy when they hold it for more than 12 months.
That means they are only taxed on 50 per cent of the profit they make.
The Albanese government’s proposed changes would replace the discount with an indexed method so investors only pay tax on real profit above inflation.
That would be paired with a new minimum 30 per cent tax rate.
The changes would kick in from July 1, 2027, with grandfathering provisions in place for existing assets in what would disproportionately benefit older investors, according to Financial Services Council analysis.
The FSC modelled results for several every day investors and found the more aggressively their investments grew, the more extra tax they would need to pay.
The modelling found a 25-year-old on the median income investing $10,000 in Australian shares would pay an extra $151 in tax after two years, $1443 after a decade and $7552 after 20 years because the changes would effectively push up CGT rate from 15 per cent to 28.8 per cent.
Meanwhile, a 35-year-old high income earner investing $60,000 into a high-growth managed fund would get hit with $66,045 more in tax over 20 years because the rate on high-growth funds would skyrocket from 22.5 per cent to 40.2 per cent.
The Albanese government has defended the reforms as being crucial to help younger Australians looking to buy their first home.
A parliamentary probe found in March that the CGT discount was a major blocker for aspiring homeowners and was exacerbating the housing crisis.
Fronting a press conference later on Tuesday, Mr Chalmers said he understood “making difficult economic reforms that can be politically contentious”.
“It’s not surprising to us that some people would prefer that the existing arrangements stay exactly as they are, but those existing arrangements are locking too many Australians, particularly young Australians, out of housing,” he told reporters.
“We’ve taken some difficult decisions – some politically contentious decisions – to fix a challenge that we’ve got at the intersection of our housing market and the tax system.
“Our changes are all about applying a fairer, more neutral treatment to different kinds of assets.”
Originally published as Chalmers dismisses budget’s ‘near-term political cost’ as peak body warns of long-term tax pain
