Australia Proposes Capital Gains Tax and Negative Gearing Reforms

The Australian federal government proposed reductions to the capital gains tax (CGT) discount and changes to negative gearing in May 2026.

These reforms aim to increase government revenue and improve national productivity, but they have sparked a divide between policymakers and the business community over the long-term impact on investment.

Treasurer Jim Chalmers (Labor) said the measures during the federal budget on May 12, 2026 ^[1]. The government intends for these tax changes to take effect starting in the 2027-28 tax year ^[2].

Supporters of the plan said the reforms could shift investment patterns away from property and toward shares. This shift could potentially benefit small-business and startup equity markets by diversifying where capital flows.

However, business groups have raised concerns that the changes will act as a drag on productivity. These critics said the tax adjustments could deter the very investment needed to scale startups and innovative enterprises.

Sector-specific alarms have also sounded within the biotech industry. Representatives from the biotech sector said the CGT changes will cause a talent drain if the government does not implement a specific carve-out for the industry.

While some frame the changes primarily as a measure to improve housing affordability, the debate in the Senate has expanded to include the broader economic implications for high-growth sectors. The government said the changes are necessary for a more productive economy, while industry leaders warn of a loss in competitiveness.