The 2026-27 federal budget has been the most controversial in a while. Amid the rhetoric about who benefits and who loses out, it is important to understand how these reforms may impact us as young people and university students, as well as scrutinise where the government could do more.
CGT and Negative Gearing
The proposed reforms on CGT and negative gearing stipulate that from 1 July 2027, negative gearing will be limited new builds, and concessions on capital gains tax will be greatly reduced.
In terms of impact, Treasury Secretary, Jenny Wilkinson, has stated that 90% of young people are expected to be better off by age 30 as a result of these tax reforms. The questions of how and why, however, are ones that the government has failed to answer in any clear or accessible way.
Looking at the data is a good place to start. The graphs below, sourced from thepoint.com, assist in demonstrating the demographics that these reforms are actively targeting. As seen in Figure 1, income from capital gains, dividends and trusts makes up just 3% of young people’s (18–29) total income, compared to 89.2% earned through salary and wages. Moreover, those aged 18–29 receive only 2% of the existing CGT discount. This is miniscule when compared to the 43% enjoyed by those aged 50–64. (Figure 2).
Figure 1 – Types of income as a proportion of total incomes (2022-23)
Figure 2 – Share of benefit of existing capital gains tax discount by age (2022-23)
When considering this data alongside the fact that people who earn a living by working pay more tax on average than those who earn a majority of their income through assets like investment properties or shares, these reforms seem less radical than some critics suggest. By virtue, the governments’ objective to boost productivity also makes sense; an attempt is being made to make it more rewarding to earn an income through work rather than passive asset accumulation.
Housing
By reducing the tax advantages of investing in the property market, housing will (hopefully) become less of a commodity. This conjecture is supported by data seen in Figure 3, showing that after the CGT discount was introduced, housing prices began rising sharply and disproportionately above annual household disposable income per capita. This demonstrates that CGT discounts were one of the catalysing factors that locked young people out of the housing market in the first place by incentivising and allowing the wealthy to accumulate property at an exponential rate that first-home buyers couldn’t compete with.
Figure 3 – Mean price of dwellings against annual household disposable income before and after CGT discounts were introduced
Ideally, and according to the government’s predictions, the new CGT reforms on property will help 75,000 Australians buy a home. Granted, this modelling is predictive over a decade, and only time will tell as to whether this is accurate.
Is there any sign of immediate cost of living relief?
To put it simply, no. Whilst this budget deserves credit for taking some genuinely bold steps to address structural wealth inequality, the effects of these reforms will take at least a decade to meaningfully materialise. In terms of immediate relief, the most prominent example is a tokenistic $250 tax cut for working Australians, which doesn’t even cover a weeks worth of rent for a room in a mould-infested Sydney share-house. Thus, there needs to be a better balance between long term change and some short-term relief. As aptly put by Allegra Spender: “if you’re going to change the tax system, you must give it back to people because otherwise they are just thinking you’re there to spend more.”[1] Many have suggested that further reforms could take the form of lowering income tax, or taxing gas exports, which the government seems suspiciously reluctant to do.
Lack of reform for students
Another downfall of this budget for young people was the lack of reform in addressing systemic barriers to tertiary education. Calls from working students for an adjustment to Youth Allowance payments were ignored, as were the recommendations of the Australian Universities Accord. Morrison’s Job-ready Graduates scheme still remains in place despite consensus (including from Albanese) that it is a failure, after $4 billion has been lost from the university sector since 2021 following the increased the cost of Arts, Business and Law degrees. Consequently, those from lower socioeconomic backgrounds continue to be disincentivised from obtaining a university degree.
https://www.afr.com/policy/economy/take-a-breath-mp-allegra-spender-criticises-rushed-cgt-changes-20260531-p602dm1