Federal budget 2026: Chalmers accepts ‘political risk’ with CGT, negative gearing overhaul
Chancellor of the Exchequer Jim Chalmers did not back down from the “political risk” associated with Labour’s sweeping reforms of capital gains tax relief and negative practices, admitting it was up to the Albanian government to explain why it had reneged on its election promise.
Tuesday’s federal budget announced that from July 1, 2027, the 50 per cent CGT discount will be replaced by an inflation-based concession and a minimum 30 per cent tax on earnings will be introduced.
The change will come with the removal of negative gears and the concession will be limited to new builds only.
However, anyone who moved negatively ahead of budget night was unaffected.
Speaking to reporters before the spending plan was published, Mr Chalmers said the government “cannot allow the intersection of the housing market and the tax system to prevent so many people, especially young people, from gaining a foothold in the housing market”.
“I now accept that this is a controversial change and I accept that this is a government coming to a different view than the one we held 12 months ago,” he said, adding: “The view is that when a government comes to a different view… for the right and just reasons, the onus is on the government to explain why.”
The reforms were part of several broader cost-of-living relief measures, ranging from tax cuts to health care.
Hire
Tenants’ rights will continue to be a focus in the budget and the Government has said Commonwealth Rental Benefit has increased by more than 50 per cent since March 2022.
Wage increases
The previously announced Fair Work Commission decision to phase out youth pay rates for retail, fast food and pharmacy workers aged 18 to 20 is also included in this year’s budget.
tax deductions
Among the broad tax adjustments was a $250 annual rebate for workers starting in fiscal year 2027-28.
The new offset comes on top of a $1,000 instant tax cut that takes effect July 1 and last year’s Medicare tax threshold increase.
The immediate tax deduction is taken from the taxable income rather than a direct deduction on the tax bill.
Fuel costs
The budget provided temporary tax relief for businesses hit hard by fuel shocks caused by the Iran war, allowing them to get longer payment terms and avoid upfront payments.
This measure comes in addition to the temporary removal of the heavy vehicle road user charge and halving of fuel duty.
All three took office for three months on April 1, and the last two cost the budget $2.9 billion.
The government is also encouraging Australians to look at greener transport options, offering a 25 per cent fringe benefits tax relief for electric vehicles valued at over $75,000 from 1 April 2027, and then for all eligible EVs from 1 April 2029.
healthcare
Health care was among the highest budget commitments; the government has pledged $25 billion over five years to public hospitals and another $1.8 billion to Medicare Urgent Care Clinics.
Additionally, $5.9 billion has been allocated over the next five years to expand the Pharmaceutical Benefits Program lists to include treatments for cystic fibrosis, chronic kidney disease and various cancer treatments.
