Budget overhauls tax system, dumps negative gearing, and favours the young
Published: May 12, 2026
Budget overhauls tax system, dumps negative gearing, and favours the young
News in brief
BHP hit an all-time high of more than $60 a share yesterday, pushing its market capitalisation over $300 billion for the first time. The Big Australian is once again the largest company on the bourse, surpassing CBA which is down about seven per cent over the past month.
The local share market fell 0.4 per cent to 8671 points yesterday, after US President Donald Trump said he will meet with top generals to discuss military options in the Middle East. It came after he accused Iran of reneging on a promise to drop its nuclear ambitions as part of a deal to end the war.
Business conditions in Australia have fallen for the fourth successive month as cost pressures hit the bottom line, according to the National Australia Bank survey. But business confidence rose last month, albeit from very low levels. It remains in deeply pessimistic territory.
ASIC is investigating DroneShield after it published incorrect sales information late last year, and its then chief executive, chairman and another director sold $70 million worth of stock.
US President Donald Trump will arrive in China in 24 hours for meetings with Xi Jinping. Trump was the last President to visit China, in 2017, when he was greeted by children waving American flags, and considered a pragmatic businessman and dealmaker. But times have changed.
Fear-o-meter
The 2026-27 budget will be forever remembered as the one where Anthony Albanese broke his promise not to change negative gearing or the capital gains tax regimes. He made the promises ahead of last year’s election in May, and last night discarded them.
In all likelihood, the Greens will support Labor to pass the proposed tightening of rules that have broadly been in place for 25 years. Not that it is a bad thing. But it is a broken promise.
It isn’t the reformist budget Jim Chalmers wanted before the Middle East conflict. It doesn’t light a fire under productivity growth, which should be the ultimate objective, even though the productivity package is a step in the right direction.
But it does make housing less attractive to investors, and that will help Aussies wanting to buy and live in a home.
And it does start the job of reducing tax breaks for the wealthy and middle classes, though it doesn’t do much of a job redistributing them to lower socio economic groups. The older you are, the less there is in last night’s budget for you. But given the inter-generational inequality, that’s not a bad thing.
The biggest disappointment is that given the government’s mandate, it could have done so much more. But at least it’s a start.
Fear & Greed Q+A today
On the market's reaction to the budget
"One way that I always judge a budget is look what happens to financial markets. Because if the financial markets think, my goodness, this is a horrendous or a fantastic budget. As I look, here we are, however many hours after the budget was delivered, the Aussie dollar is sort of ticking along.
"ASX futures have moved in line with US futures. Bond yields are up a couple of ticks, but so are they globally. The markets have had a big ho-hum about this, and even though there's a lot of discussion still to be had about the capital gains tax issues for investments, that's probably going to play out over weeks rather than hours. The market reactions, a bit of ho-hum, let's get on with what's happening in the real economy."
Federal Treasurer Jim Chalmers last night handed down what he called the most important and ambitious budget in decades, including changes in taxation, the NDIS and private health insurance, housing and health and aged care.
It was a reformist, labour budget, and started the job of shifting preferential tax treatment away from older and richer Australians, towards younger Australians. Many of the tax changes are directly aimed at making housing more affordable.
Some of the key changes include introducing a minimum capital gains tax rate of 30 per cent on property and shares sold from mid next year. Negative gearing will be abolished for existing houses purchased from today and there will be a minimum 30 per cent tax on discretionary trusts.
The money from these initiatives will be used to fund a Working Australians Tax Offset of up to $250. This will be paid annually to more than 13 million people. And Chalmers suggested there would be another tax cut by the next election, due May 2028.
Inflation forecasts have been pushed higher to five per cent this year, with the war in the Middle East blamed. That’s based on the assumption that oil prices don’t rise any more. And Treasury has downgraded its economic growth forecast next year from 2.75 per cent to 1.75 per cent.
This week the team from Ausbiz, including Juliette Saly and Nadine Blayney, join us on Fear & Greed. Watch live at ausbiz.com.au and sign up for a daily market wrap at ausbiz.com/newsletter.
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Source:Treasury