Albanese government set to revive negative gearing, CGT and trust taxes in budget targeting young voters

Key facts

• The May 12 budget will include changes to negative gearing, capital gains tax, and trust taxation.
• Negative gearing changes will be fully grandfathered for existing assets.
• The 50% CGT discount may be halved to 25% or replaced with an inflation-indexed discount.
• Labor's 2019 policy to abolish franking credit refunds will not be revisited.
• Millennials and Gen Z now constitute a majority of the electorate, shifting political calculus.
• Treasurer Jim Chalmers defended the policy reversal as building trust through 'right decisions for right reasons.'

Budget to revive tax trio on housing and wealth

Next week’s federal budget will reintroduce changes to negative gearing, the capital gains tax discount, and the taxation of trusts, marking a significant shift in the Albanese government’s fiscal strategy. The measures, which formed the core of Labor’s unsuccessful 2019 election platform, are being revived with modified designs aimed squarely at younger voters. Government sources confirmed that the three tax policies will form the centrepiece of a budget framed around housing affordability and intergenerational fairness. The only element from the 2019 agenda not included is the abolition of cash refunds for excess franking credits, which was abandoned after a concerted campaign by Liberal shadow treasurer Tim Wilson.

Design details remain fluid as cabinet finalises measures

Cabinet met on Monday to finalise key elements, but some details have been left undecided until the last minute. The negative gearing changes will be fully grandfathered, meaning existing investments retain the old rules indefinitely, but it remains unclear whether the policy will cap the number of negatively geared properties, limit it to newly built homes, or phase it out entirely for future investments. For capital gains, the government is likely to differ from the 2019 proposal to halve the 50% discount to 25%. Alternative options include a return to the pre-1999 inflation-indexed discount, as canvassed in a recent Greens-led Senate inquiry. the government plans to keep old rules for gains already accrued on existing assets but apply new rules to future gains, similar to a proposal by independent MP Allegra Spender.

Broken promises and the politics of trust

Prime Minister Anthony Albanese had promised during the election campaign that negative gearing was 'off the table,' stating, 'the key is supply, and that measure will not boost supply.' He also gave no indication of reforming capital gains tax. Now, both policies are set to change, prompting accusations of broken promises. Treasurer Jim Chalmers, grilled on live television, defended the reversal by redefining trust. 'The best way to build trust is to make the right decisions for the right reasons,' he said, citing intergenerational pressures in the budget, tax system, housing market, and economy. He pointed to the government’s earlier decision to alter stage three tax cuts as a precedent for changing course transparently.

Housing investment incentives under scrutiny

Negative gearing and the capital gains tax discount have long made housing investment more attractive than other forms of investment, becoming a popular wealth management tool for many Australians. The combination has been criticised for inflating property prices and locking younger generations out of the market. The government’s assessment is that the politics of the package are now more favourable than in 2019, given that millennial and Gen Z voters constitute a majority of the electorate. The budget will carve out new homes from the changes, aiming to boost supply while curbing investor demand.

Trust taxation and potential worker tax cut

The budget will also crack down on the use of trusts, with speculation that the minimum tax rate on trust distributions could be lifted to 30%. This would fund a possible tax cut for workers, though details remain unconfirmed. The only tax policy from Labor’s 2019 agenda not included is the abolition of franking credit refunds. The government has chosen to focus on housing and wealth measures that resonate with younger voters, while avoiding a repeat of the 2019 campaign’s backlash.

Outlook: a budget shaped by intergenerational equity

As the government finalises the budget, the debate over housing, wealth, and fairness is set to intensify. The changes to negative gearing and capital gains tax will test whether the Albanese government can balance its promise of intergenerational equity with the political fallout of breaking election commitments. Chalmers has signalled that the government is willing to recalibrate its approach, arguing that responsible governance requires adapting to changing conditions. Whether voters accept that rationale will be determined in the weeks ahead.

The bottom line

• The May 12 budget will revive negative gearing, CGT, and trust tax changes from Labor's 2019 platform, with modified designs.
• Negative gearing changes will be fully grandfathered; CGT discount may be halved or replaced with inflation indexation.
• The government broke election promises on negative gearing and CGT, defended by Chalmers as necessary for intergenerational fairness.
• Millennials and Gen Z, now a majority of voters, are the target audience for the housing-focused tax package.
• Franking credit refunds remain untouched; trust taxation may increase to fund worker tax cuts.
• The budget aims to boost housing supply while curbing investor demand, but details on negative gearing caps or phase-outs are still unclear.