Chalmers’ budget. From landlord paradise to clever country?

Hailed as the biggest reform since the GST, Chancellor of the Exchequer Jim Chalmers is promising cheaper homes through first home buyer support, downshifting and Capital Gains Tax changes. Harry Chemay Reporting from Canberra.

The Labor Government has just announced its 2026-27 Budget, the fifth budget since it was re-elected in 2022. There’s a strong sense of deja vu about this.

Not because key tax reform initiatives such as the tightening of negative guidance and capital gains tax concessions were widely publicized in advance, but because it takes me back to the 2021-22 Budget and one of the first articles I wrote MWM.

In this article, I noted that the total value of residential property in Australia had surpassed the $8 trillion mark just before Budget day 2021. In doing so, he had exceeded the total value of the entire Australian superannuation system, the value of all companies listed on the Australian Securities Exchange, and the total annual value of Australia’s GDP by approximately one trillion dollars.

“Australia’s housing market no longer just exceeds the productive economy, it dwarfs it,” I wrote as the national average house price rose above $650,000 and Sydney’s median house price reached $1.1 million.

Looking at 2021 prices from today’s perspective, total residential property is now north of $12 trillion, the national average house price is close to $1 million and Sydney’s average house price is well over $1.4 million. This makes 2021 prices seem like little more than an interesting historical artifact.

Housing continues to completely dominate the nation’s economic affairs in a way few other developed economies have experienced.

The 2026-27 budget is designed to reignite Australia’s sluggish business productivity growth while dampening residential real estate agents’ enthusiasm.

Songbirds and snakes. How to end the ‘Hunger Games’ in housing affordability?

CGT Balancing Act

According to the Budget Papers, only 7% of taxpayers report net capital gains each year. Most use the CGT deduction method to calculate tax liability.

Changes to the CGT regime will only apply from 1 July 2027. The 50% discount will continue to apply to gains accrued on eligible existing investments prior to the start date, regardless of when the gain occurs.

Given how widely the proposed CGT changes were publicized ahead of the Budget, it is no surprise that the voices from the business community, particularly from Australia’s startup ecosystem, opposing the expectation were loud, harsh and vociferous.

Those who take significant risks to start a business, create jobs and increase Australia’s economic output do so in the hope that the shares they own will provide a return commensurate with all the risks taken, sometimes over decades. Them,

A return to the pre-September 1999 regime could result in after-tax rewards being insufficient to justify the risks involved.

This is a legitimate concern.

The government appears willing to negotiate here and has indicated there will be further consultation on details, including for early-stage and start-up businesses. In addition, on first reading there appears to be no reduction in the CGT relief currently available to small business owners, including relief into retirement.

Rebalancing economic incentives

Overall, this Budget can be described as ‘bold’, aiming to implement perhaps the most comprehensive change to Australia’s tax system since the Ralph review and the introduction of the GST in 2000.

The proposed changes reflect the fact that household wealth in Australia today is dominated by residential property, with housing wealth of around three dollars for every person retiring. The distribution of this wealth is becoming increasingly skewed, as housing outcomes are now likely to be determined by family ties as much as individual earning capacity.

As I conclude in my 2024 series on Australia’s ‘Housing Hunger Games’:

“Left unchecked, whether by negligence, intentionality or otherwise, Australia risks turning into a nihilistic land where the aim of the game is to ‘wish for your neighbours’ children’. In this case, one’s primary financial objective is to opportunistically build wealth through ownership, and in doing so accept that home ownership will be less attainable for future generations. The mitigator is therefore to act as the Bank of Mum and Dad, keeping the first home deposit ready for each child.”

Jim Chalmers’ fifth Budget is an attempt to address the growing generational imbalance. Time will tell how these proposals will now turn into Treasury Bills, be discussed, negotiated, amended and ultimately passed into legislation.

It will be nothing but a smooth transition.

Wealth inequality. Housing costs are draining Australia’s middle