Budget 2026 Australia: Jim Chalmers announces capital gains tax and negative gearing reform for housing

Jim Chalmers has announced the most ambitious and politically risky tax changes since the Howard era as part of a federal budget that defies the looming economic threat of the Iran war to push Australia along the “hard road to reform”.

Arguing that the Australian public is ready for difficult choices aimed at reviving intergenerational fairness and the collapsing dream of home ownership, the government will scale back tax breaks for landlords by abolishing negative gearing for new investors and replacing the 50% capital gains tax discount with the inflation-linked approach that existed before 1999.

Treasury modelling suggests that the property tax changes will help an extra 75,000 Australians “achieve the dream of home ownership” over the coming decade.

“I think the time is right for these kinds of reforms and for this level of ambition,” the treasurer said.

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“Around the Australian community there is an appetite for a government which is prepared to take on some difficult things. It has become increasingly clear to us, for example, that the housing challenge is primarily about supply but it is not exclusively about supply.”

The budget also includes the previously announced deep cuts to the national disability insurance scheme, with the “difficult but necessary reform” slated to save $36.2bn over the four-year forward estimates.

The property tax changes that cost Labor two federal elections are now likely to receive an easy passage through parliament, as Anthony Albanese flexes his party’s huge majority in the lower house and a friendly Senate.

The budget also includes tax relief for more than 13 million workers in the form of an automatic $250 “working Australians tax offset” but the relief will be delayed until 2027-28.

This sits alongside a $1,000 instant tax deduction that will deliver an average $205 benefit for 6.2 million people in 2026-27.

The budget includes $2.6bn for the previously announced 26-cent temporary cut to the fuel excise.

But Labor held back from announcing any major new cost-of-living support measures, in a major break from what has been the centrepiece for budgets at the federal and state level since the Covid pandemic began.

Instead, the government preferred to keep its powder dry as the Treasury modelled a worst-case scenario where a doubling in oil prices to US$200 a barrel would drive inflation above 7%, unemployment above 5% and send the economy backwards in the September quarter.