Treasurer Jim Chalmers has stood by the Albanese government's contentious changes to capital gains tax as the first installment of tax reforms are introduced. Presenting the bill to Parliament on Thursday, Chalmers described it as 'the first step in the most ambitious tax reform package for a quarter of a century.'
Key Reforms in the Bill
The bill centres on four major changes revealed in the Albanese government's controversial Budget earlier this month. A $250 annual Working Australians Tax Offset (WATO) is tipped to benefit 13 million workers and provide a permanent boost to after-tax incomes. Additionally, a $1,000 instant tax deduction will be introduced to simplify returns and cut paperwork, with workers expected to save about $205 to $230.
Property Tax Changes
The package further tightens property tax concessions. From July 2027, negative gearing will only apply to new builds, preventing investors from claiming losses on existing homes purchased after Budget night on May 12. At the same time, capital gains tax rules will change. The 50 per cent discount will be replaced by an inflation indexation model, with a minimum 30 per cent tax rate applied to gains. Switching to capital gains indexation, a system last used before 1999, means investors will pay tax only on 'real gains' after inflation.
Government's Rationale
Chalmers said the reforms would target distortions in the housing market and deliver real cost-of-living relief. The $1,000 instant deduction will start in 2026–27 and benefit 6.2 million workers. 'This is a bill for workers, for first home buyers, and for future generations,' he said. 'It means more money in the pockets of our nurses and teachers, tradies and truckies. Not only will this make tax time simpler for millions of workers, it will put cash back into their pockets as well.'
Housing Supply Focus
By restricting negative gearing to new builds, the government hopes to direct investment towards boosting housing supply rather than existing stock. 'We have an ambitious housing agenda and supply is still our primary focus, but it's become increasingly clear that can't be our only focus,' Chalmers said. He pointed to decades of property price growth outpacing wages, arguing tax incentives have favoured investors and contributed to the problem.
Opposition Criticism
The Coalition has accused the government of bundling the WATO with controversial changes to capital gains and housing policy, calling the package deliberately divisive. Opposition figures claim Labor is hiding higher taxes within the laws and have branded the reforms a 'Trojan horse', warning Australians could pay more overall. In response, Chalmers conceded the reforms are 'contentious' but necessary. 'We have seen dishonest scare campaigns already and deliberate distortions of the truth,' he said. 'The facts matter.'
Future Outlook
It remains unclear if the government will pursue further carve-outs for capital gains tax as the bill travels through Parliament, with calls to ensure start-ups and businesses are protected from the new rules. The laws will not be passed until July at the earliest, with the Senate not sitting until the end of June.
