Australian homeowners, investors, and renters are bracing for a major shake-up to the housing market, with the federal government set to break a key election promise by targeting negative gearing and capital gains tax concessions in tonight's budget.
The federal budget, due to be handed down at 7:30pm Tuesday, is expected to deliver one of the biggest overhauls to property tax settings in decades, with negative gearing reforms and the 50 per cent capital gains tax discount both under threat.
Speaking on Sunrise from Parliament House in Canberra on Tuesday morning, Treasurer Jim Chalmers said tonight's budget would focus on "resilience and reform" amid growing global economic uncertainty.
"Tonight's budget will be our most responsible and it will be our most ambitious," Chalmers said. "It will be a really responsible budget focused on resilience and reform."
But the approach also marks a significant political backflip after Prime Minister Anthony Albanese declared just last year changes to negative gearing were "off the table".
For millions of Australians, the changes could have far-reaching consequences. Property investors are likely to face higher tax bills, while households already struggling with rising living costs are weighing whether promised relief measures will outweigh broader tax increases and ongoing housing pressures.
Among the measures expected tonight is a $250 tax offset for the 2027 financial year. However, workers are also tipped to pay an extra $440 in tax due to bracket creep.
Finance Minister Katy Gallagher defended the government's decision on Tuesday morning, saying the reforms are aimed at addressing worsening affordability and intergenerational inequality.
"I hope people look at the budget as a whole. They can see all of the issues that we've been dealing with," Gallagher told Sunrise host Nat Barr. "This ambitious budget is really about resilience, reform and providing relief where we can, but also with a view to the future, looking at some of those really entrenched issues around intergenerational equity."
The government says the changes are partly aimed at helping younger Australians struggling to break into the housing market amid soaring prices and limited supply. Gallagher said there are millions of young people "who are increasingly locked out of the housing market".
"We've had a huge focus on supply. That continues and you've seen some announcements on that in the last couple of days. But we also have to look at some of the other issues that are impacting the housing market," she said.
When pressed on whether Labor would have won the election had it disclosed the changes beforehand, Gallagher said governments needed to respond to changing economic conditions and explain policy shifts to voters.
"When governments change their mind or come to a different view, then the responsibility is to front up and explain why you're doing that and explain it to the community," she said.
The housing measures are expected to sit alongside major budget packages focused on fuel security, cost of living relief, productivity, tax reform and government savings.
Chalmers said: "There will be more than the usual amount of savings and more than the usual amount of reform in the face of more than the usual amount of global economic uncertainty."
The treasurer is also expected to announce $45 billion in cuts aimed at improving the budget bottom line, although the government is still tipped to deliver a deficit tonight.
The full details of the negative gearing and capital gains tax changes will be revealed when Treasurer Jim Chalmers hands down the budget at 7:30pm tonight.
