CGT fears deepen housing debate ahead of Federal Budget

Speculation over possible changes to capital gains tax concessions has intensified debate around Australia’s housing market ahead of next week’s Federal Budget, with Treasurer Jim Chalmers signalling the government is examining how the tax system interacts with housing affordability while finance industry figures warn investor confidence is already weakening.

Speaking to Sky News on Thursday, Chalmers said younger Australians were finding it harder to enter the housing market and said the government had “an obligation and a responsibility to respond to that in one way or another”.

“Without backing in some of the assumptions in your question, I think it’s really clear to a lot of Australians that the housing market and the tax system is making it harder for people, particularly for younger people,” Chalmers said.

He stopped short of confirming any Budget measures linked to capital gains tax or property investment settings but acknowledged speculation around changes.

Chalmers said the government’s objective was not to punish investors but to improve access to housing.

“You have to wait and see what’s in the Budget on Tuesday night,” he said. “I’m obviously aware there’s a lot of speculation. That speculation can be right and it can be wrong.”

The Treasurer said the government’s focus remained heavily weighted towards housing supply but added there was also a need to look at “the composition of the housing market”.

Chalmers also defended the government’s broader economic approach ahead of the Budget, saying global instability and inflation pressures had complicated the process of finalising fiscal measures.

“Every day there’s been some unpredictability in the global economy and that’s meant that we’ve taken the time to get it right,” he said.

At the same time, mortgage broker and finance executive Julian Finch warned that uncertainty surrounding possible CGT changes was already affecting property investment behaviour across Australia.

“We are seeing hesitation, second-guessing and in some cases, people walking away from property investment altogether,” Finch said.

“When confidence drops, markets slow. It’s that simple. Stock reduces because people put off selling and buyers pull back because they don’t want to purchase a property that will fall in price. The whole market is in disarray thanks to the federal government.”

Finch argued any major tax reform affecting investors should be taken to an election campaign rather than introduced through the Budget process.

“If they want to change such an important tax that many people rely on, take it to an election,” he said. “Don’t try and ram it through under the guise of helping to bring in younger voters. That is just rubbish and millennials should not be falling for the fake rhetoric or narrative.”

The debate comes as affordability pressures continue across major cities, with younger Australians facing higher deposits, elevated rents and tighter borrowing conditions despite expectations of future interest rate relief.

Chalmers said the government’s objective was not to punish investors but to improve access to housing.

Julian Finch, however, argued that reducing investor incentives could create longer-term problems for future generations attempting to build retirement wealth through property

“Our motivation there is not to make judgments about people who’ve done well, but to make it easier for people who feel locked out of housing because of the way that our housing market and our tax system interacts,” he said.

Julian Finch, however, argued that reducing investor incentives could create longer-term problems for future generations attempting to build retirement wealth through property.

“For decades, Australians have relied on property as a long-term wealth and retirement strategy,” he said. “In 10 to 15 years, millennials will be the ones relying on these investments, just as baby boomers do today.”

He said younger Australians should consider the long-term implications of any reduction in CGT concessions.

“There is a perception that taxing investors more heavily will fix affordability issues,” Finch said. “In reality, it risks undermining the very system future generations will depend on.”

Finch also rejected suggestions that long-term investors were the main cause of rising property prices.

“Houses are not expensive because someone bought them 40 years ago,” he said. “They are expensive because of broader economic settings, including government spending, inflation and supply constraints.”

The Treasurer indicated the upcoming Budget would include broader productivity and investment measures alongside housing and tax reforms.

“We need to lift the speed limit on the economy,” Chalmers said. “The best way to shift productivity in the right direction after two decades of underperformance is to get what the economists call capital deepening.”

As debate over housing affordability, tax settings and investment confidence intensifies, the government is expected to face close scrutiny when the Budget is handed down next week.