As Australia’s Albanese government prepares for its upcoming May federal budget, a key policy debate over capital gains tax (CGT) reform has moved to the forefront, with new residential properties emerging as a potential candidate for exemption from planned cuts to the controversial CGT discount.
CGT is a levy applied to profits earned from the sale of assets including stocks and real estate, which is counted toward a taxpayer’s annual income. Current rules grant a 50% discount on capital gains for assets held longer than 12 months, with an automatic full exemption for an individual’s primary place of residence.
Ahead of potential changes expected to be outlined in the budget, the Business Council of Australia (BCA) has formally called on the government to carve out an exception for newly built dwellings if it proceeds with rolling back the existing 50% CGT discount. BCA chief executive Bran Black argued that any adjustment to the CGT discount must be structured to avoid discouraging critical investment in new housing supply, a core priority of the current government’s economic agenda. Black also pushed back against any retrospective application of CGT changes, noting that any alterations to the tax code are best implemented as part of a broader, comprehensive tax reform effort rather than isolated adjustments.
Prime Minister Anthony Albanese this week confirmed to Nine Entertainment publications that the government is exploring policy changes that go beyond simply increasing overall housing supply, amid ongoing political pressure to address rising wealth inequality. The Labor government is currently facing growing pressure from populist party One Nation, which has sought to mobilize voter anger over widening income and wealth gaps. Albanese pushed back against populist framing, arguing that meaningful change comes from giving all Australians a tangible stake in the national economy, not divisive rhetoric.
The push for CGT reform lines up with recent comments from Treasurer Jim Chalmers, who said last week he would be “pretty happy” if the 2026-27 budget is remembered as a landmark tax reform budget. The budget’s finalization has been delayed compared to typical timelines, a knock-on effect of economic volatility stemming from the ongoing war in the Middle East.
This is not the first time Labor has pursued changes to property-focused tax arrangements: prior to the 2016 and 2019 federal elections, the party proposed adjustments to negative gearing that were intentionally structured to avoid retrospective application and exempt new housing, in a bid to protect investment in new supply.
Ahead of the May budget, the government faces competing pressure from both the opposition crossbench and major political parties on the CGT debate. Greens Senator Nick McKim argued last month that Labor holds a historic opportunity to pass ambitious, progressive tax reform through the current parliament, saying that if the government is serious about cutting inequality and addressing the national housing crisis, now is the time to modify CGT. On the opposite side of the debate, the center-right Coalition has raised repeated concerns that any changes to CGT will increase the overall tax burden for Australian investors and homeowners.
Independent voices have also weighed in to the Senate Select Committee on the Operation of the Capital Gains Tax, which has been collecting submissions on the current system. Prominent financial journalist and author Alan Kohler told the committee earlier this year that the current tax structure sends a clear signal that capital income is prioritized over labor income in Australia, a dynamic he described as one of the foundational drivers of national inequality. Kohler argued that the current CGT framework over-adjusts for inflation, unlike income tax, and that the 50% discount is larger than needed to account for inflation while unnecessarily distorting investment choices toward existing assets.