Next week’s federal budget will feature changes to the capital gains tax (CGT), negative gearing and the taxation of trust funds.
Final details of the budget have not yet been revealed, however several government sources confirmed that these trio of taxes will be the centre of the budget, aiming to target young voters.
The changes are set to include negative gearing to be curbed, the CGT discount overhauled, and new tax rules imposed on trusts. This comes as the Albanese government prepares for a debate about housing, wealth and intergenerational fairness.
Given the majority of voters are millennials and gen z, the focus on the housing elements of the debate are more favourable.
Proposed changes to CGT are expected to move away from the previous plan to cut the 50% discount to 25%, with discussion instead turning to a system that links the discount to inflation, similar to rules used before 1999. This approach was recently raised in a Greens-led Senate inquiry.
A key issue is how the changes would apply to existing investments — whether current rules would remain in place permanently or shift over time.
According to the Australian Financial Review, the government is considering a hybrid model by keeping current tax settings for gains already built up on assets, while applying new rules only to future gains, an approach similar to one suggested by independent MP Allegra Spender.
Negative gearing changes are expected to be fully grandfathered, protecting existing investments, though it’s unclear whether future rules will cap the number of negatively geared properties, apply only to new builds, or phase the benefit out.
Together with capital gains tax concessions, the system has long favoured property investors, allowing them to offset rental losses against wages and later sell for a profit taxed at a discounted rate.
Economists say reforms could reduce investor demand, slightly lower house prices, lift home ownership, and push rents up modestly — depending on the policy design. More grandfathering would limit both market impact and government revenue while avoiding claims the rules were “changed.”
Federal Treasurer Jim Chalmers has suggested the changes won’t raise much revenue due to transition arrangements.
The government is also considering reforms to discretionary trusts, though no model is finalised. Options include a minimum tax on distributions, but changes are complicated by the widespread and complex use of trusts by both wealthy individuals and small businesses.
Capital gains tax applies when assets are sold, with only half the profit typically taxed at normal income rates, making it relatively concessional.
Source: ABC News
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