Investors will face at least a 30% effective tax on net capital gains from July 2027, under a bill the federal government introduced to parliament on 28 May. Treasurer Jim Chalmers says the measure ends the long-standing 50% discount for assets held more than 12 months, replaces it with inflation-adjusted taxation of real gains, and builds in a floor so taxpayers cannot pay less than an effective 30% on net capital gains. The package also limits negative gearing so tax-loss offsets apply only to newly built homes, a move the government frames as steering private finance toward new supply and easing competition for first-home buyers. The bill passed the House but must still win crossbench support in the Senate.

30% will apply from July 2027 as a legislated minimum tax on net capital gains, according to the reforms set out in the budget and introduced in the lower house on May 28.

What the reforms change

The centrepiece is the end of the long-standing 50% capital gains tax discount for assets held more than 12 months. Under the proposed law, real gains, adjusted for inflation, will be the taxable base and a floor will prevent net capital gains being taxed below an effective 30% rate. Treasurer Jim Chalmers framed the package as a rebalancing of tax treatment across income types and asset classes, saying consultation will follow on technical rules, including tailored treatment for small businesses and startups.

The government says official statistics show one in five Australian households owns a property other than their primary residence, and it linked that ownership pattern to higher house prices and investor competition for first-home buyers. To steer investor finance toward new supply, the reforms would limit negative gearing so that tax-loss offsetting applies only to newly built homes. The Treasury and the Treasurer listed households that own investment properties, small businesses and startup investors, and holders of listed shares, crypto assets and private-business stakes as likely to be affected.

Treasury officials told the press that even after abolishing the 50% discount, capital gains would still receive tax concessions compared with wages, a point used by the government to present the measures as rebalancing rather than a pure tax increase. The Treasurer also said the government would consult on technical details before legislating final rules, signalling carve-outs could be considered for certain small business or startup arrangements.

Mastheads

The bill was introduced in the House of Representatives on May 28 and passed the lower house on Thursday, but it must still clear the Senate where the government doesn't hold a majority and will need crossbench support. Opposition parties and some industry groups criticised the measures, accusing Prime Minister Anthony Albanese of breaking a 2025 election pledge not to change housing taxes.

The government itself conceded the changes proved unpopular in opinion polls it cited and said property and business groups have already appealed for exemptions or narrower targeting confined to real estate.

25% isn't a figure in the reforms, but the move has already generated a regional political response. New Zealand politicians used the debate as a campaign talking point. New Zealand Prime Minister Christopher Luxon told Prime Minister Albanese that introducing a capital gains tax would be a "wrecking ball" for his economy, and New Zealand ministers publicly contrasted their tax settings with Australia’s proposed changes. Those remarks followed a public pitch from New Zealand’s finance minister encouraging firms and business founders to consider cross-Tasman relocation amid a domestic New Zealand debate over capital gains tax.

The government is defending the package as an effort to reduce distortions between asset classes and to close opportunities for tax minimisation associated with the former 50% discount. Critics say the measures risk squeezing investment into rental housing and could hit small investors and startup founders. The Treasurer has committed to further technical consultation to refine rules for small business and startup treatment before final legislation is settled.

For affected taxpayers the mechanics matter: inflation-adjusted gains change the calculation taxpayers have used for decades, and the minimum effective rate aims to prevent low-tax outcomes when nominal gains are small or negative after deductions. The proposed negative gearing limit to newly built homes directly ties tax settings to supply policy, a detail the government says will channel capital into fresh housing construction rather than existing stock owned by investors.

Passage through the Senate will test how persuasive that narrative is to crossbench senators and to voters. The government will need to translate the consultation commitments into technical drafts that address concerns from property groups, small business representatives and market participants while keeping the 30% floor and the inflation-adjusted basis at the core of the reform.

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Senate consideration is the next hurdle; the government will need crossbench votes before the bill can become law.

This article was created with AI assistance.