OD #20 - The budget that was supposed to save young Aussies .... but didn't

They called it the most ambitious budget in decades and framed it as a win for young Australians, but when we read the fine print, the housing story gets uncomfortable fast. Oscar goes solo to unpack the 2026 Australian federal budget and what it means for anyone under 35 trying to buy a first home, get financially stable, or even just keep up with rent. 

We walk through the two big levers: negative gearing being restricted to new homes and the capital gains tax shake-up that replaces the 50% CGT discount with a new approach to taxing real gains for newly purchased assets, with a minimum 30% rate. On paper, it sounds like it should cool investor demand and help first home buyers. In practice, the grandfathering rules mean existing investors keep many of the best benefits, while new buyers face the changed settings. We also talk through why many Australians are wary of new builds and off-the-plan purchases, which complicates the government’s push toward construction. 

Then we zoom out to the real-world pressure cooker: inflation running hot, repeated interest rate hikes, and how even a small rate move can wreck borrowing capacity for first-time buyers. Most importantly, we dig into the second-order effects people ignore, especially the risk that rents rise when established property becomes less attractive to investors and rental supply tightens. Finally, we call out what’s missing from the budget if the goal is true housing affordability: more housing supply, better zoning, faster approvals, and stamp duty reform. 

If you’re trying to make sense of the Australian property market right now, listen through, share it with a mate, and leave a review so more people can find the show. What do you think this budget changes for you?

Transcript

The Budget Promise And The Catch

Oscar Don 0:00

The government just handed down what they're calling the most ambitious budget in decades. They say it's for young Australians. They say it's about intergenerational fairness. But here's the uncomfortable truth. If you're under 35 and you're trying to buy a house and just get ahead financially, well, this budget might actually make your life harder. So let's get into it.

SPEAKER_01 0:24

Welcome back to another episode of the Finance Bible Podcast.

Oscar Don 0:28

Zeke here, and you're coming home to the scale. But before we get into it, please note that nothing in this podcast should ever be considered as personal financial advice.

SPEAKER_01 0:36

Although, if financial advice is what you're seeking, let us know we can get you into the correct team. But for now, sit back, relax, and enjoy the show. Let's get into it.

Young Renters Under Real Pressure

Rate Rises Make Entry Even Harder

Negative Gearing Limits And Grandfathering

CGT Discount Ends For New Assets

Why Prices Stay High And Rents Rise

The Missing Fix Supply And Stamp Duty

Final Take And Share Your View

Oscar Don 0:50

Welcome back to another episode of the Finance Bible podcast. You're joined with just myself, Oscar, today. And where were you last night? Last night we got handed down the 2026 federal budget. And it's the budget that was supposed to save young Australians. But in our eyes and a lot of people's eyes that I've been reading this morning online and last night, it's not the one to save young Australians. It's actually going to do the opposite and impact young Australians and really delay them in getting their feet onto the property ladder and getting them financially stable. The main part of the reform or the budget last night was really around negative gearing and capital gains tax. So I'll just quickly jump into some of the headlines, then we'll get into the actual impact that they may have. The government's ambition last night is really framed as property tax reform targeted at getting younger generations onto the property ladder. And from now on or from last night, negative gearing will only be allowed on new homes. So for established homes that you purchase from last night, losses can only be used to offset other property income, not your wages. On another point, we've got in terms of capital gains, the 50% capital gains tax discount will be replaced by taxation of real gains from 2027 to 28 for assets purchased from now, facing a minimum tax rate of 30%. And then you've got the existing assets will use a proportionate mix of older new models based on how long they've been held. The reason for this, apparently, around 83% of the benefit of the current CGD, CGT discount goes to the top 10% of income earners, and 83% of new investor loans in 2025 went to existing property, not new housing. And that is why they're trying to shift this so people are wanting to purchase new housing. On paper, this sounds like a win for young people. You know, you reduce the perks for wealthy investors, less competition for first home buyers, and then look, prices may come down. But here's where it gets complicated. And we're gonna jump into it in a little bit more detail now. So let's set the scene. Where are the young Aussies at right now? Look, 31% of Australians rent, and 60% of those 31% are under 35 years old. So we are young. This is the generation that's renting indefinitely, and it's not by choice, it's by default. Australian property prices are ridiculous for people trying to get in there. You know, you're talking at least a million dollars for something, especially in Melbourne and Sydney, which is not even amazing. It might be a million dollars for a rundown unit at least. Three in 10 Australians don't own their own home, and the majority of those people are young. And so the impact this has on young Australians is every year of renting instead of owning is a year of wealth not being built. And renters don't benefit from capital gains. They're paying someone else's mortgage, as everyone knows. And over a decade, that gap becomes enormous. As well as that, we've still got prices rising, um, inflation hitting 5%. And as you saw last week, the RBA has hiked the interest rates once again. And something pretty drastic is under the current government, Anthony Albanese, since 2022, we have had 12 interest rate rises. 12 between 2022 and 2026, four-year window. Under, go back a little bit, Scott Morrison, Malcolm Turnbull, and Tony Abbott from 2013 to 2022. We just had one interest rate rise. That's over a nine-year period versus a four-year period, 12 to 1. It's just crazy what's going on. Even before this budget, the backdrop was brutal. Inflation is expected to peak at 5% mid this year, which is well above the RBA's target ban, hence why interest rates have risen again. And that also means look, more rates are probably going to come. And higher rates mean higher mortgage repayments, which means the barrier to entry for these renters and the young Australians is even getting harder and harder and harder. A rate hike of just 0.25%, for example, on a 600k mortgage adds roughly$90 a month in repayments. And first-time buyers are borrowing at the limit of their capacity anyway. So any further hikes is purely just going to price them out entirely. So what did the government actually do last night? We spoke about it a little bit before, but this is what they actually did. So, firstly, the most important news that you'll see online and podcasts is negative gearing has been restricted to new homes only. So from last night, negative gearing losses on established investment properties can no longer be offset against your wages. So what that means is if your expenses outweigh the rent of your investment property, let's say you're spending an extra$2,000 per year to cover the expenses of your of your property, then that$2,000 goes against your wages. And of the financial year, if your tax return, you can offset that and get a bit of a refund back. But what the government's saying is, no, you cannot do that anymore. So you can only offset other rental income or capital gains. But with new builds, these are still fully deductible. The government wants to push investors towards building and not buying. But the funny thing is, a lot of investors and a lot of people, even first home buyers, are all skeptical of buying new houses because off the plan, you've heard all the horror stories, builders go bust, developers go bust. There's so many horror stories with it. And buying an established house gives people the sense of calm. They know what the, they know what's going on, they're in full control. And the negative gearing component, which all of Australians have been doing, it gives them a bit of confidence, saying, look, if I'm spending five grand a year, that's okay. I'm happy to spend five grand a year to hold onto my asset because I know I'm going to get a bit of a refund come my tax time. So it's really impacting all the young generation who are planning to purchase their first home with a negative gearing. And what the negative gearing news probably does is the grandfathering is included as well. So that's a grandfathering clause, which means every property already owned by an investor before last night keeps full negative gearing benefits, which I'm glad they've done that. But the 1.2 million existing investors are completely untouched. So only new purchases are affected. So the playing field shifts only at margins. Also, last night the capital gains tax discount was scrapped so that it's been replaced with a 30% minimum tax. Generally, it was a 50% capital gains tax discount, one of the most generous property investor perks in the world. Now being replaced. So from 2027, gains on assets brought from today will face a minimum 30% tax rate based on real gains indexed to inflation. So what this is designed to do is generally the 83% of the discount went to the top 10%, as I mentioned earlier. So they thought by removing it, it was meant to redirect that advantage away from wealthy investors and level the field for everyone else. But what it probably does, again, existing assets grandfathered and an investor who bought in 2015, sells in 2030, look, they still get the old 50% discount. So the new rules only apply to assets per from tonight. So the big winners of the existing system largely stay ahead. Now, this is the exciting part. This is why the budget, in my opinion, probably won't work. And it's a bit of an uncomfortable truth that a lot of people, especially labor voters, don't want to hear. So, firstly, prices still go up, just 4% instead of 6%. So the Treasury's own modeling says house prices will grow at 4% per year instead of 6% for a couple of years. That's the win they're trying to sell. But here's the thing prices going up slower, slower is not the same as prices going down. And young Australians who are still trying to get into the property market aren't celebrating 4% on annual growth because it means every year there are 4% less chance of them getting into the property market because they're getting priced out, which is very interesting. So the impact this has on the young Aussies, let's just say so if the median Melbourne home is 950k today and grows at 4% instead of 6, by 2030 it's about 1.11 mil instead of 1.2. And look, a 90k difference sounds good until you realize that's still 1.11 mil and deposits, stamp duty, and servicing costs are still completely out of reach for most under 35s on average incomes. Then you've got the grandfathering, which completely cooks the inequality in. The Greens were blunt about this. Restricting negative gearing only for new purchases means every existing property investor keeps every benefit they currently enjoy, which it protects the wealth of people who are already in the system, which I'm glad that is the case for ones who've got in. But the impact this has is the investors who've been competing against first home buyers for the last decade, they're still competing. Nothing changes for them. The people this policy hurts are future investors who might have been young Aussies trying to build their first property as a wealth vehicle. And the most ironic part of this whole budget, which they didn't think would happen, is rents are going to go up. No one wants to talk about it. If you make established properties less attractive to investors, some will sell and some will exit the rental market entirely. Fewer rental properties means tighter supply. Tighter supply means higher rents. And right now, rental vacancy rates are already at historically low levels. As well as that, let's say you're a property investor buying a property from last night, so with the new rules coming in, and your property is negatively geared. Well, instead of getting your$2,000 to$3,000, depending on how much you're out of pocket back per year, to make the gap, what are you going to do? You're going to increase your rent. So you get the money back into your pocket and you reduce your spending. So that is how these young Australians, who predominantly are renters, they're going to cop the backlash of this and have higher rents, which is going to hurt their own pocket. And the ironic thing is if they're wanting to also get into the property ladder and buy a property as a renter, well, then your rents are increasing. So you're not saving as much money as you were. And in terms of servicing, if you're trying to service for a loan to buy a property, well, your servicing is going to be stretched because you're spending so much more money in rent. You're not saving as much. And look, hey, we're having interest rate hikes yet again. So good luck servicing a loan at, you know, it might be 8% interest rate. Who knows? It's just a never-ending cycle. And we're really, they're saying this is for the young Australians, but it's not. And yeah, young Australians who rent the majority are under 35, and they can they could, and I do think they will see their rent go up as a direct result of this policy. The funny thing is as well, last night the Albanese government mentioned that they think rent will probably only go up$4 a week. Which is crazy.$4 a week. It's not going to go up$4 a week. That is just absolutely ridiculous. Another point, it's a tax policy dressed up as a housing policy. The property council said it plainly. This is about raising revenue and changing who benefits from tax concessions. It's not about building more homes, and that's the real issue. Australia doesn't have too many investors. It has too few homes, which has been, which has been a problem for the last decade. And they're saying now this is how we're going to fix it. It's not how we're going to fix it. Supply is a structural problem. Zoning laws, construction costs, slow approvals, none of that changes. You can tweak the tax settings forever. But if there aren't enough homes being built close to where people want to live, nothing will shift for young Australians. So the bigger picture and what's actually broken is but got no fix for supply, stamp duty or zoning. Eliza Owen, who works at Core Logic, she said it perfectly. There's no overnight solution because it's been decades of policy failure. The real levers are supply side. So more homes, better zoning, stamp duty reform, faster approvals, which none of those are in the budget. Stamp duty alone adds roughly an extra year of saving for first home buyers in most cities. And when you increase the rent, it's going to be more than a year. It's one of the biggest barriers for entry for individuals trying to get into the market. And it wasn't mentioned last night, it wasn't touched at all. So young Audsies are still paying the same entry toll on top of a deposit that already takes a decade to save and now on top of more rent. Another point is the generational wealth gap is going to continue to widen. You've got charmers last night acknowledging a labor zone economic reform last August that the tax system is overly generous to older and wealthier Australians at the expense of younger people. They said it out loud, and this is the reform they produced. So someone who bought a home in 2005 has seen their wealth compound for 20 years, tax advantage the whole way. A 28-year-old today starts a race from scratch in a market 300 to 400% more expensive. And the best thing is, with fewer tax benefits and more rate uncertainty. So the gap doesn't close. It purely stretches. And if you're if you're not one of those fortunate people who have a family backing you and who have done this before, it's it's hard to get ahead because the government's really not helping us. They're they're trying to help their own pockets because they put so much money into the country debt and giving other pe other countries and funding other countries for no reason and just really screwing the Australian population and the Australian dream. So look, is this budget doing something? Technically, yes. Does it solve the problem for Australians? Not even close. And slowing down the rate you're being priced out is not the same as being let back in. Until we get serious about supply, stamp duty, and actually building homes where people want to live. The property dream for under 35s stays exactly that a dream. And the gap widens, as I've mentioned. So drop us a comment. I want to hear your thoughts. Do you think this changes anything for you? Do you think this is going to impact you further along? But it's a crazy time we're living in. It's ridiculous what's been going on, in my opinion. But yeah, drop your comments and let's hear your thoughts.

SPEAKER_01 14:18

Well, that is the end of the episode. We hope you enjoyed it. And if you did, you know exactly what to do. Hit that follow button, like button, subscribe, share it to your friends, families, or even a co worker. If you're really feeling different, you can send it off to an ex. But catch you next time. Hope you enjoyed it. Damn it.

Oscar Don 14:36

Cheer out.