Chalmers leaves door open for CGT discount to be cut
The debate around the Capital Gains Tax (CGT) discount has flared up yet again.
Federal Treasurer Jim Chalmers (pictured) is facing renewed pressure to overhaul property tax concessions, with calls from both the NSW government and the OECD explicitly blaming the current tax settings for locking first-home buyers out of the market.
The debate has shifted from one of fairness to one being framed by state treasuries as a direct obstacle to housing supply and ownership.
'Investor advantage' under fire
Pouring fuel on the debate is a submission from NSW Treasury to a federal parliamentary inquiry, which argues that the 50% CGT discount has skewed the market in favour of investors.
The submission presents stark data that will be familiar to any broker writing loans in Sydney or Melbourne.
In the mid-1990s, lending volumes for investors and first-home buyers were roughly equal, hovering around $5.1 billion and $4.2 billion respectively. However, the gap has since widened into a chasm. By September 2025, investor lending had surged to $11.8 billion, while first-home buyer lending languished at just $3.6 billion.
NSW officials argue that tax settings like the CGT discount amplify investor purchasing power, allowing them to bid more aggressively at auctions and effectively price out owner-occupiers.
The submission claims this system "exacerbates inequality" and funnels billions to wealthier cohorts rather than incentivising new builds.
A political high-wire act
Chalmers has been careful not to explicitly endorse a policy shift, aware of the political scar tissue remaining from Labor’s 2016 and 2019 election defeats. In those campaigns, Labor proposed restricting negative gearing to new homes and halving the CGT discount to 25% – policies that were ultimately rejected by the electorate.
However, Chalmers’ language has noticeably softened.
While previously ruling out changes, he recently noted he would be "guided by... the idea of regionals, especially for working people" and admitted that housing is a "defining part of the intergenerational challenge".
When pressed on potential reforms, Chalmers stated that any steps would be a matter for the cabinet, but pointedly did not shut down the conversation as aggressively as Prime Minister Althony Albanese has in the past.
“We’ve made it very clear that we consider there to be intergenerational issues in housing, but our focus there is on building more homes, on supply,” Chalmers said earlier today outside parliament.
The comments followed Cabinet Secretary Andrew Charlton describing the upcoming budget as “a budget of reform” in a Sky News internew.
The supply-side counter-punch
The property industry has moved quickly to defend the current settings.
The Property Council of Australia warned the inquiry that tampering with the CGT discount is not a "panacea" for affordability. Its submission argues that reducing the discount could actually backfire by depressing new housing construction – a sector already struggling with labour shortages and high material costs – which would, in turn, drive rents even higher.
Economists like Saul Eslake offer a middle ground, suggesting that the previously proposed 25% discount was too low, and that a finer balance must be struck to avoid stifling investment in new housing stock.
Other experts have suggested grandfathering existing arrangements or limiting the discount solely to newly constructed homes to ensure capital flows into supply rather than speculation.
Shadow housing minister Andrew Bragg also warned against the impact of CGT changes, telling reporters that “increasing taxes” was “not going to build more houses”.
“The CGT ideas being bandied around, I mean, the taxes and regulation burden on housing is already through the roof,” Bragg told Sky News.
