Treasurer Jim Chalmers Signals Major Tax Shift: Capital Gains and Negative Gearing Targeted in Budget
Economic News update using Gemini AI agreaggator /Checked in the Newsroom
CANBERRA –11 May 2026
Treasurer Jim Chalmers has paved the way for a dramatic overhaul of the Australian tax landscape, confirming that Tuesday night’s Budget will include significant changes to capital gains tax (CGT) and negative gearing.
The announcement marks a major pivot for the Albanese government, which had previously resisted calls to revisit these controversial policies. Speaking ahead of the May 12 hand-down, Chalmers framed the measures as essential for “intergenerational fairness” and rebalancing a property market that has long favored established investors over first-home buyers.
The End of the 50% CGT Discount
The centerpiece of the tax shake-up is a plan to wind back the 50% capital gains tax discount. While full details will be revealed on Tuesday night, the government is expected to move toward an inflation indexation model for assets acquired after Budget night.
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The Shift: Under the proposed changes, the current blanket 50% discount—introduced in 1999—would be replaced by a system where only “real” gains (those above the rate of inflation) are taxed.
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The Timeline: Reports suggest a one-year grace period, with the new rules coming into full effect in July 2027 to prevent a sudden “stampede” of market activity.
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Scope: While the primary focus is on property, the changes are expected to apply broadly to shares, ETFs, and other managed funds held outside of superannuation.
Negative Gearing Restricted to New Builds
In a move echoing Labor’s 2019 election platform, the Treasurer indicated that negative gearing will be significantly curtailed.
Current speculation suggests that negative gearing will be limited to newly built properties for any purchases made after May 12. Existing investments are expected to be “grandfathered,” meaning current owners will not lose their existing tax benefits. The policy is designed to incentivize the construction of new housing supply rather than subsidizing the trade of existing dwellings.
Defending “Broken Promises”
The Treasurer acknowledged that these moves represent a departure from previous campaign assurances but argued that the economic climate—and the housing crisis—demanded action.
“The difficult decision but the right decision is to do the right thing with the right policies to deliver,” Chalmers said. “Even though the challenges in our housing market begin with supply, they don’t end there. We need to make the housing market and the tax system fairer.”
Trust and Business Tax Measures
The Budget is also expected to include:
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Discretionary Trusts: A potential minimum tax rate (rumored between 25% and 30%) on distributions to curb tax avoidance.
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Small Business Support: The $20,000 instant asset write-off is expected to be made permanent to provide certainty for small firms.
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Cost-of-Living: A new fuel security package and a temporary cut to the fuel excise to “take the sting” out of global energy price hikes.
Treasurer Jim Chalmers will formally hand down the Budget at 7:30 PM AEST on Tuesday, May 12.
