Welcome to my column, Young & Invested, where I discuss personal finance and investing for Gen Z and Millennials.
This column aims to be a resource for young investors navigating an ever changing financial, political and social landscape as they try to build wealth. Tune in every Thursday for the latest edition.
Edition 64
Broken promises. Generational betrayal. The death of the Australian dream.
Over the past week, I’ve read just about every headline imaginable. Unless you were born yesterday, Anthony Albanese is hardly the first Prime Minister to be accused of back tracking. But that doesn’t mean we can’t express discontent with what has been delivered.
After years of calls for meaningful reform, this is Labor’s answer. Credit is due for attempting something politically ambitious. But it was always intellectually dishonest to pretend there would be no losers.
As someone who has been politically aware through a several election cycles, I must admit this is the most puzzling budget I’ve seen. And I say that as a young person who doesn’t own a home – supposedly one of the biggest beneficiaries of these changes.
Things have never felt as fragmented or emotionally charged as they do today. Commentary has largely split into two camps: the changes are too extreme vs they don’t go far enough. I’d like to think I reside somewhere outside this discourse. I’m less interested in ideological warfare and more in how these measures land on young Aussies trying to build wealth in a system that already feels stacked against us.
The intergenerational inequity farce
One thing the budget coverage has made painfully clear is how quickly parts of the media will reach for a generational-war storyline, even if the policy doesn’t reflect that. Negative gearing is the clearest example of this. Commentary has been framed as a dramatic win for young Aussies at the expense of older investors. This framing is not only shallow and lazy, but actively misleading.
For those who need a refresher, negative gearing is a concession that allows property investors to deduct rental losses from their other income, which reduces their overall tax bill. It is recognised as one of the many drivers behind rising house prices and intergenerational wealth divides.
The budget’s reform restricts negative gearing to new builds only. Every existing investment property remains ‘grandfathered’, meaning current owners keep the negative gearing advantages they already have until the property becomes positively geared. The reform prevents the current system from becoming more distortionary but doesn’t unwind the benefits already accumulated over decades.
This isn’t an argument against grandfathering. Removing negative gearing outright would likely risk destabilising the rental market. But we should be honest about what this design actually does. The idea that existing property investors are the ‘losers’ in this equation simply isn’t supported by the design of the reform.
Source: Property update by Metropole. August 2025.
The government’s stated aim is to redirect investor demand away from established homes that no longer carry tax concessions. In theory, this gives first-home buyers a clearer path into the market and nudges investors toward funding new construction rather than bidding up existing stock.
But the reform also entrenches a two-tier system. Long-standing investors retain one of the most generous tax breaks in the country, while new buyers enter a market where established homes no longer come with negative gearing benefits and long-term capital gains are indexed rather than halved. The effect is that the advantages of the past are being persevered for those who already hold them.
No one can perfectly model the behavioural effects of grandfathering, but the incentives are somewhat predictable. Investors who already own properties now have a reason to hold onto them, knowing they can’t access favourable tax treatment on future purchases unless they buy new.
Given the average investment property is negatively geared for several years, the distortions created over decades of negative gearing won’t ‘unwind’ until these properties eventually change hands. Even the government’s own modelling concedes the impact on house prices will be a modest at 2% lower growth in price appreciation over a couple of years, relative to no policy change.
The economic and political risks of not grandfathering are obvious. But packaging this move as a dramatic generational victory at the expense of Boomer wealth is simply disingenuous.
The CGT crunch
Tax is simply the price we pay to live in a functioning society. But there’s a difference between contributing fairly and being squeezed from every angle. Alongside the negative gearing overhaul, the government has rewritten how capital gains tax (CGT) works across almost every asset class.
Previously, if you held an asset for more than 12 months, you received a 50% CGT discount, meaning only half the gain was taxed. The new system replaces the flat 50% discount with indexation, where gains are adjusted for inflation rather than halved outright. In many cases, most investors will receive a lower total return.
Any gains made before 1 July 2027 remain eligible for the 50% discount, but everything after that falls under the new rules. Investors who purchase new builds retain the ability to choose between the existing 50% CGT discount or the new indexation method when they eventually sell.
In addition, the budget introduced a minimum 30% tax rate on capital gains regardless of your income bracket. This means even lower income investors e.g. students, part-timers and retirees face a 30% floor on the taxable portion of their gains (note that income support recipients are exempt).
Younger Aussies have increasingly relied on the share market to build wealth. For many, it has been the only realistic way to save for a deposit in a housing market they can’t afford to enter. Now those same young investors will face higher CGT on the few tools they can realistically access. Of course, there remains the First Home Super Saver Scheme, but that comes with its own set of trade-offs.
It also goes beyond those trying to build wealth. Individuals may sell investments to cover career breaks, medical bills, divorces and any unexpected expenses. Under new rules, even someone earning low or zero income in a given year will still face a 30% tax rate on the gain from selling. Exactly how that’s meant to address structural inequity is anyone’s guess.
So, what’s all this for? Is it going to make things easier? The government has framed these changes as a way to improve intergenerational inequity and make housing more accessible. Treasury modelling suggests the reforms will result in around 75,000 additional owner-occupiers over the next decade. But more owner-occupiers don’t imply housing becomes more affordable. Treasury concedes that the changes will remove around 35,000 new homes from the pipeline.
Young people are constantly being told that these reforms are ‘for us’, yet the policies appear to simultaneously reduce housing supply, increase the tax burden on the assets we rely on and preserve the most generous tax settings for those who have already enjoyed the benefits. Here lies the indisputable irony.
To be clear, this frustration doesn’t stem from entitlement over previous tax benefits. Individuals across the full spectrum of income are being squeezed, while an intergenerational culture war is being manufactured for reasons no one can clearly explain.
Radio silence on bracket creep
One of the more salient omissions in the budget is the unwillingness to address bracket creep. That refers to the process in which your income rises with inflation and pushes you into a higher tax bracket, even though your real purchasing power hasn’t improved. This disproportionately affects younger workers at the beginning of their careers as they typically earn lower incomes and modest pay rises that don’t result in a meaningful increase in living standards, despite being pushed to higher tax brackets.
Instead of structural reform that addresses this matter, wage earners have been handed a $250 Working Australians Tax Offset. Some could argue this reflects a rather superficial gesture under the guise of achieving intergenerational equity.
What does this mean for young investors?
As individual investors, the reality is that we can’t control housing supply, inflation, tax policy or the political chaos that is currently ensuing. What we can control, is how we respond. Investing is difficult even in the best conditions. It’s hard not to feel discouraged when uncontrollable barriers arise between you and your goals. But focusing on the things such as the level of risk we take, the fees we pay and our behavioural edge are still well within reach.
Naturally, the changes will have a significant impact not only on your asset allocation, but also the optimal tax environment for each investment. Mark recently went through five ways to invest smarter under the new tax regime.
A final note
The 2025 Federal election marked a turning point where Gen Z and Millennial voters become the largest voter bloc. However, almost half of young voters reported their primary motivation was simply to avoid a fine. This shouldn’t come as a surprise to anyone. Election time is often shrouded in distasteful political theatre that seeks to divide and point-score on ideological lines. Budget week is largely an extension of the same theatre.
It’s easy to see politics as a something distant and vaguely unpleasant. For many, that distance has hardened into understandable disillusionment. But I don’t think civic engagement has to involve pledging blind allegiance to a party, nor does it require pretending the system isn’t flawed. No matter how tedious it feels, scrutinising policy, asking questions and making informed choices is one of the few forms of agency we have.
It’s also worth staying sceptical of anyone who claims to know exactly what’s coming next. No one can reliably predict how shifting these goalposts will play out long-term. Obviously, experience will help, but as we’ve learnt, certainty is often an illusion and the rules can change at any time.
This article touched on a few key points of the budget, but if you’re looking for a full overview, you can find that here.