Federal Budget 2026: Commonwealth Bank share prices fall as capital gains tax fears escalate for share market
Professional investors suggest growth shares will struggle to find buyers as capital gains could be taxed at more than 40 per cent under Labor’s Budget.
Commonwealth Bank’s share price tumble on Wednesday signals a rough year ahead for shares as investors delivered a brutal verdict on the Labor Government’s changes to taxes on equities and investment properties in its Budget.
Australia’s largest bank and economic bellwether tumbled 10.3 per cent to $153.67 per share for its worst day on record, as investors scrambled to avoid big tax hikes and the market worried about weakening property prices.
The selling in CBA spilled across Westpac, NAB and ANZ Bank, which all lost more than 1.5 per cent.
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By continuing you agree to our Terms and Privacy Policy.“The market is still digesting the implications,” said Emmanuel Datt, the founder of fund manager Datt Capital.
“Where people have large capital gains on paper they may sell before the tax increases and CBA is an obvious candidate for selling. To me, its fall is saying the market expects a weaker economy and softer housing market, which is a risk for Australia’s financial system.”
The Budget’s proposed changes to capital gains tax (CGT) on most assets including shares and investment properties will see the 50 per cent discount abolished, in favour of taxing all gains after a small discount for inflation that typically averaged 2.5 to 3 per cent over the past decade.
Dr Don Hampson, co-founder of $18 billion equities manager Plato Investments, said the changes will discourage young entrepreneurs from building businesses and retail investors from taking a risk on growth shares.
“If I were setting up Plato today, I’d seriously consider going somewhere like Singapore, or even New Zealand, where they don’t have capital gains tax, it discourages investment here,” said Dr Hampson.
“Older people do have more capital gains, but it’ll certainly discourage younger people from investing to try and get a deposit for a home loan.
“And, If I’m an individual thinking about where’s the way to minimise tax, it’s still invest in your home. It’s tax free. That’s not changed, and there’s no incentive for empty nesters, or baby boomers, to trade down. So, I’m not sure it makes housing cheaper.”
Other investment industry professionals including, Cliff Mann, chief executive of exchange-traded fund start-up ETF Shares, said the changes will increase the hurdles for employees seeking to grow businesses from scratch.
“It doesn’t help start-ups such as ours, where equity incentives are commonly used as an alternative to cash for staff compensation,” said Mr Mann.
The Labor government under Treasurer Jim Chalmers has presented the rewriting of the rules as a way to tax income less and capital more. It argues this is necessary to balance the national budget and redistribute wealth from wealthy generations to less well off younger ones.
The government also argued the higher CGT rates and future abolition of negative gearing will keep a lid on runaway house price growth.
Political fight over tax changes
The tax changes are due to come into law on July 1, 2027, with the Liberal Coalition vowing to scrap them if elected to government.
“Our position is we’re going to do everything we can to stop these bad taxes, toxic taxes, from getting through Parliament,” Coalition leader Angus Taylor told Sky News on Wednesday.
Under the Budget, negative gearing on investment property purchases will be abolished, other than for new builds. Existing property investors will be allowed to retain the benefits of negative gearing as long as they hold the property.
Share market investors will have to pay far higher taxes on gains accrued after July 1, 2027, even on investments made prior to it. A minimum 30 per cent CGT will also be imposed, irrespective of total income earned in a single tax year.
“This will make Australia one of the highest tax jurisdictions globally,” said Mr Datt.
“Ultimately, these policies will drive a capital flight. I’ve already had investors of mine who’s capital is portable saying they’ll move overseas in the future.”
Other global jurisdictions like New Zealand, Singapore, and Dubai apply a 0 per cent CGT rate to encourage investment and boost productivity.
CGT rates in the UK and US typically average around 20 to 25 per cent. By comparison, Australia’s CGT rates under the Budget’s inflation indexation system, where the entire gain is taxed, less inflation, could often equal 40 per cent or more.
“I think it’s a really poorly thought out change without any regard for the costly implications for younger people who may want to invest in shares for longer terms,” said Mr Datt.
“Older people enjoyed the lower tax rates to accumulate wealth and now younger people will have to pay lots more, so it’s hard to believe this policy was thought out at all.”
Mining stocks soar, growth companies may face more pressure
Dr Hamson said the Budget’s changes will extend any favouring of low-growth businesses that pay out profits as dividends, at the expense of companies that tend to reinvest their profits to grow larger.
On Wednesday, Australia’s mining sector extended a run of outperformance versus higher growth sectors as benchmark copper prices ran to a record high of $US6.669 a pound.
Copper’s breakneck bull run pushed BHP Group shares up 2.9 per cent to a record close of $61.52 and Rio Tinto to an all-time high of $189.00. The S&P/ASX 200 Materials Sector has surged 54 per cent over the past year, whereas the S&P/ASX All Tech Index has sunk 35 per cent over the same period.
“The reality is it’s not too bad for a lot of stocks we [Plato] buy, as they’re high-income stocks,” said Dr Hamson. “But, I think for the ‘sexy’ investments - the tech and growth stocks - it won’t be good and it won’t encourage any young entrepreneurs to set up in Australia, that’s for sure.”
ANZ Bank’s economics team said the Budget’s tax changes were insufficiently large to impact the bank’s forecasts for economic growth, interest rates, or inflation over the fiscal year ending June 30, 2027.
“Overall, we see nothing in the budget to dissuade us from the view that the RBA is likely to keep the cash rate at 4.35 per cent through 2026 and 2027,” said the bank’s economics team. From a simple top-down level, there is neither an easing or tightening in the fiscal policy.”
