Federal budget unveils biggest property tax overhaul in decades

Treasurer Jim Chalmers will deliver his fifth federal budget on Tuesday, May 12, 2026, promising the most ambitious reforms yet to address intergenerational equity while navigating economic disruption from the war in Iran. The budget introduces the largest changes to property taxation in decades, restricting negative gearing to newly built properties, winding back the capital gains tax discount, and imposing minimum tax rates on family trusts. Prime Minister Anthony Albanese, who repeatedly denied before the last election that Labor would change these rules, acknowledged the government must act as young Australians increasingly find themselves priced out of the housing market, saying a responsible government must be prepared to make tough decisions. To fund these initiatives, the government will implement $64 billion in spending cuts and reprioritisation, while making targeted investments including $2.55 billion for a three-month fuel excise cut, $25 billion for state hospitals, and $6 billion for new Pharmaceutical Benefits Scheme listings. The budget projects a $44.9 billion improvement in the nation's finances over four years, with combined deficits forecast to exceed $180 billion, though gross debt will surpass $1 trillion later this year. The single largest cut comes from the National Disability Insurance Scheme, with $35 billion sliced over four years by reducing growth to around 2 percent per year and removing approximately 160,000 participants from the scheme. The changes to negative gearing and capital gains tax have drawn sharp criticism from the opposition, with Shadow Treasurer Tim Wilson accusing the government of deceit and betrayal, arguing the reforms will hurt the people they claim to help. However, UBS analysts noted the reforms could level the playing field between property and other investments, with current tax settings having put upward pressure on property prices for decades. Housing initiatives include nearly $60 million over four years to house young people on Youth Allowance or Austudy through community housing providers, with the program expanding to house 4,355 people by 2029-30. The budget also includes $53 billion in additional defence spending over a decade, $387.4 million for CSIRO despite planned job cuts, and $4 billion for Melbourne's Suburban Rail Loop, while scaling back the Inland Rail project. Economic forecasts show inflation reaching 5 percent by mid-year with slower growth over the coming four years, partly due to elevated oil prices following the Iran conflict.