The likely change to the capital gains tax and the 'Ponzi scheme' of housing

Summary

The Morning Edition – Episode Summary

Date: April 21, 2026
Topic: The Likely Change to the Capital Gains Tax and the ‘Ponzi Scheme’ of Housing
Host: Samantha Selinger-Morris
Guest: Shane Wright, Senior Economics Correspondent, The Age and Sydney Morning Herald

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Episode Overview

This episode focuses on anticipated reforms to Australia’s capital gains tax (CGT) system, likely to be announced by Treasurer Jim Chalmers. The discussion explores why the changes are being considered, how they fit into the context of Australia’s housing affordability crisis, and who is likely to win or lose if CGT is adjusted. Senior economics correspondent Shane Wright breaks down the historical context, the underlying economic reasoning, and the probable impacts on investors, home buyers, and the wider public.

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Key Discussion Points & Insights

1. Why Reform Capital Gains Tax Now?

• Chalmers' Motivation: The government has been considering changes to CGT since an economic roundtable in August 2025, alongside potential negative gearing adjustments. ([01:24])
• Context: Australia’s property market is described as a “Ponzi scheme” due to out-of-control housing prices—four capital cities have median house prices above one million dollars, a situation unseen in the US.

  "Australia has four capital cities where the median house price is more than a million dollars. The 50 capital cities of the United States, not one has a median house price of a million dollars." – Shane ([01:31])

2. What Is Capital Gains Tax? How Did It Evolve?

• Introduction: Capital gains tax was introduced by Paul Keating in the mid-1980s to ensure that wealth gained from assets (like investment properties or shares) was taxed, correcting previous loopholes. ([02:12])
• Original System: Keating’s model allowed for the inflation-adjusted assessment of gains, taxing only the real gains above inflation ([03:09]).
• 1999 Change: Peter Costello reformed CGT, replacing the inflation adjustment with a 50% discount on capital gains before tax, aiming to stimulate share market investment, but inadvertently juicing property investment instead.

  “Oh, my God. Was that wrong? Utterly wrong… They were absolutely correct. Australia went from a nation of positively geared landlords to one of a majority of negatively geared landlords…” – Shane ([04:27])

3. The Present Problem

• Distortion: Costello’s discount made property investment more attractive, leading to increased speculative buying, fewer homes for first-home buyers, and market distortion ([05:42]).
• Longstanding Debate: Since 2010, there’s been pressure to reduce the concession, with Ken Henry’s review highlighting the system as “too generous” and distorting the property market ([06:18]).

4. What Reform Is Jim Chalmers Considering?

• Two Options on the Table:
  • Returning to Keating’s inflation-based system.
  • Reducing the discount from 50% to 30%.
• Practical Impact Example: On a $750,000 gain from selling a Sydney property, under Costello’s system you’d pay tax on $375,000; under Keating’s, about $420,000 ([07:20]).
• Signal to Investors: The aim is to reduce incentives for buying existing dwellings (where investors compete with home buyers) and potentially redirect capital elsewhere.

  “…perhaps you should be looking at something else because we know like property investors…are largely competing with First Home buyers…” – Shane ([07:55])

5. How Would Changes Affect Investors and the Broader Public?

• Investor Impact: Makes investment in existing dwellings less attractive; smaller gains over longer terms if building new properties ([09:08]).
• Public Benefit?: Extra tax revenue from investors would be minimal, especially if current investments are grandfathered.

  “It may not be a lot of mullah…You are sending a signal to property investors...” – Shane ([11:00])

• Underlying Aim: Encouraging money to flow into more productive parts of the economy instead of property speculation ([11:39]).

6. Political Risks and Precedent

• Political Fallout: Bill Shorten’s proposed reform (halving the concession and changing negative gearing) was a key factor in his 2019 election loss ([12:54]).
• Comparing Policies: Chalmers’ likely changes are less aggressive than Shorten’s (from a 50% to ~30% discount versus Shorten’s proposed 25%), but may be bundled with other reforms like limits to negative gearing ([13:30]).

7. Expected Market Impacts

• Housing Sector Claims: Predict a loss of 33,000 new homes over five years if reforms pass, out of 1.2 million planned — a relatively small reduction ([14:16]).
• Think Tank Modelling: The Grattan Institute forecasts an even smaller impact: 10,000 fewer homes, ~1% drop in house prices (about $16,000 for a $1.75m property) ([14:45]).
• Key Determinants: Bigger factors than tax policy are planning laws, interest rates, population growth, and skilled labour supply.

  “The number of homes we build, far, far more important…don’t get me started on NIMBYs and YIMBYs…” – Shane ([15:27])

8. Public Opinion & Reform Prospects

• Polling: 42% support reducing the CGT concession, only 19% oppose; but support could shift depending on details and what’s done with the revenue ([16:22]).
• True Reform: Real change would require a broader package, not just tweaks to CGT and negative gearing.

  “If he just does CGT and negative gearing…this isn’t really tax reform, it’s tax reform adjacent.” – Shane ([17:13])

• Will Change Help Young Australians?

  “You would hope it does something… The property market is our Achilles heel. We have stuffed up the economy, we’ve stuffed up the opportunities for our young…” – Shane ([17:49], [18:16])

9. Long-Term Outlook

• Small Steps: Changes are incremental; the overall direction might be positive, but transformational impact is uncertain.

  “I guess I’ll cross my fingers, cross my toes. I’ll find a rabbit’s foot, maybe a four leaf clover…and say a few prayers.” – Shane ([19:01])

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Notable Quotes and Memorable Moments

• “Australia has four capital cities where the median house price is more than a million dollars. The 50 capital cities of the United States, not one has a median house price of a million dollars.”
  — Shane Wright ([01:31])

• “Oh, my God. Was that wrong? Utterly wrong...Australia went from a nation of positively geared landlords to one of a majority of negatively geared landlords…”
  — Shane Wright ([04:27])

• "Investing, in inverted commas, in property—new homes are not productive elements. They deliver you shelter...but apart from that, they aren’t overly productive."
  — Shane Wright ([11:30])

• “This is the hill on which other politicians have died. Right.”
  — Samantha Selinger-Morris ([12:32])

• "We stand out in the rest of the world in terms of the proportion of landlords to the overall population. It is weird and it's because of our tax system."
  — Shane Wright ([13:40])

• “It is ultimately, at the end of the day, the number of homes we build far, far more important…”
  — Shane Wright ([15:27])

• "The property market is our Achilles heel. We have stuffed up the economy, we've stuffed up the opportunities for our young, for our next generation…"
  — Shane Wright ([18:16])

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Key Timestamps

• 00:38: Introduction to the topic and Shane Wright
• 01:24–02:12: Why CGT reform is being considered; context of the housing market
• 02:12–04:27: Explanation of CGT history and Keating’s rationale
• 04:27–06:18: The Costello reform and its unintended effects
• 07:20–08:40: Expected models for reform and comparative impacts
• 09:04–10:22: How changes push or redirect investment
• 11:00–11:39: How the broader public may (or may not) benefit
• 12:32–13:40: Political context and public opinion
• 14:16–15:27: Effects on housing construction and prices; limitations of tax policy
• 16:22–17:23: Public sentiment and need for a broader tax reform package
• 17:39–19:13: Will reform actually help young Australians? The big picture and Shane’s (modest) hopes

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Tone and Delivery

The tone is sharp, wryly humorous, and grounded in pragmatic analysis. Both Samantha and Shane communicate complex topics in accessible language, with relatable metaphors and analogies. There’s frankness about the limits of tax reform in solving Australia’s entrenched housing issues, and a clear recognition of public cynicism and hope surrounding the debate.

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Conclusion

The anticipated CGT reforms are seen as a small but symbolically significant step. While they may slightly reduce investor advantages and modestly impact house prices and construction, deeper issues like planning, interest rates, and labour shortages play a far larger role in housing affordability. The episode concludes on a note of tempered optimism—hopeful, but realistic about the long road ahead for genuine reform.

Transcript

[A]

Treasurer Jim Chalmers is likely about to make a big change to our tax system. But will it do anything to combat intergenerational inequality? I'm Samantha Sellinger Morris and you're listening to the morning edition from the Age and the City Morning Herald. Today, senior economics correspondent Shane Wright on who this change will benefit and who it will cost and by how much. It's April 22nd. Hey Shane, welcome back to the podcast.

[B]

Oh, Samantha, you don't know the joy of seeing your happy face again.

[A]

Well, I'm very excited, you know I am, because I reckon you've written what amounts to a near mic drop bit of journalism about tax such that it is because you have just revealed that Jim Chalmers is leaning towards reform, reforming the capital gains tax. Now this is a controversial space, right? It triggers a lot of feelings in people. Jealousy, justice or lack thereof. So can you just briefly tell us, well, how do you know this and why would Jim Chalmers reform this tax now?

[B]

Well, I'm not going to give away how I know this, Sammy. You never. It's like asking a magician how to, how they put together their secrets.

[A]

Okay, well you, you record from within, within the halls of power at Parliament House. So we'll just, we'll tell the listeners that, that we know.

[B]

That'll do. But look, since about August last year, after the roundtable, the economic roundtable that Jim Chalmers called together for three days, that the government has been considering a change around capital gains tax and perhaps negative gearing, all tied up with the Ponzi scheme, which is the Australian housing market. I was actually just doing a little research. Australia has four capital cities where the median house price is more than a million dollars. The 50 capital cities of the United States, not one has a median house price of a million dollars. This is part of the issue that Australian housing is just stupid levels anyway,

[A]

okay, it's gone out of control. So let's just, let's get into it. How long has the capital gains tax been around and what is it?

[B]

So mid-1980s, Paul Keating, treasurer at that time, says, look, we've got to change the tax system. It is stupid. Like the top marginal tax rate was 60 cents in the dollar and it kicked in pretty low. The company tax rate was higher. And capital gains, which is the amount of money you might make selling, say an investment property or some shares, was untaxed. So if you were wealthy and you were buying and selling assets, you were effectively making off like a bandit. You weren't getting taxed.

[A]

So wait, I'm just going to interrupt there for a second. So just, just to make it very clear for those of us who, let's just say, have a film degree instead of an economics degree like some people. SHANE Right, so the capital gains is you buy something for a million dollars, you sell it for a million and $750,000. That capital gain is the $750,000. Right.

[B]

You go to the top of the class with that analysis there.

[A]

SAMANTHA okay, thanks, Shane as you were.

[B]

Thank you so much. He introduced what was the Australia's first capital gains tax. And this was occurring across the world at that time because economists, treasuries were working out that there was this whole amount of wealth being created that was untaxed. And it meant that the income tax system was doing a lot of the heavy lifting. So he also introduced fringe benefits tax at the same time, which helped Keating introduce the deepest cuts we've ever seen in personal income tax and the biggest cut in company tax. So when he introduced it, one of the most important elements was that he didn't want to tax the increase in the value of an asset that is actually just moving in line with inflation. So just because something goes up in line with inflation doesn't mean you're making away with money. It's the excess that you're trying to tax that's the capital gain. So he set up a system whereby you had to calculate, let's say you bought your little property for a million dollars as a landlord and 10 years later you sold it for 1.75, you would track how much inflation had gone up over that period. So between like we're using 1.1 and 1.75 million, that is the movement in the Sydney median house price between 2015 and 2025. During that period, inflation went up by 33%. So under Keating system, you, you'd say, right, it wasn't really $1 million. That's the starting point. It was 1.33 million, which is 33% of $1 million on top of that. So you would tax the difference between 1.33 and 1.75. So in 1999, Peter Costello comes along and he has had a review into the business taxation system. And one of the most curious elements of that report was a recommendation to change the capital gains tax on two elements. One, it was a little bit clunky by having to calculate inflation over a set period of time. Two, this review said, look, we want people to invest money into the Australian share market. We want them buying shares supporting Australian companies. So if we change the capital gains tax calculation from this inflation system to whereby we will just whatever capital gain you make for tax purposes, we will cut that in half and then tax you on that remaining 50%. The theory being this will help the share market. Oh, my God. Was that wrong? Utterly wrong. There were a few charities actually at the time said, this won't work, it'll go into property. Lo and behold, they were absolutely correct. Australia went from a nation of positively geared landlords to one of a majority of negatively geared landlords because people went, right, they took the punt, I'll borrow more money, I'll buy a property. The capital gain I make on holding that for a few years and because it's so concessionally taxed, I'll make money that way. That's what's been going on since 1999. Then there's been a long argument from 2010 when Ken Henry's review of the tax system came out, he actually came up and said, so this is a guy who was in treasury when Costello made the change, said it's proving too generous and it is distorting elements of the property market. So probably since 2010 there has been this debate going about how the capital gains tax system of Costello works with the property market, works with negative gearing, works with housing construction, works with the tax system. And we've got to this point where by on May 12, everybody is now expecting that there will be a change to be announced by Jim Chalmers.

[A]

But specifically, the change that we're expecting he is going to announce is a return to this Paul Keating era. Cgt Is that right?

[B]

There is a number of different alternatives that you can examine. He has effectively narrowed it down to two, which is leaning towards going back to Keating or taking the discount from 50% to 30%. Now we'll come back to our house In Sydney, the 1.75 million. Under the. Under the Costello system, you would pay marginal tax rate on $375,000, which is 50% of the 750,000 profit that you've made on the sale of the property. Under the Keating system, you would pay tax your marginal rate on about 420,000. So you can see that there's an increase in the amount of tax that you've paid. But that's one element. The other is that it is telling property investors, look, perhaps you should be looking at something else because we know like property investors, like the industry says, oh, they are building new homes, some do more than 80% are just buying existing dwellings where they are largely competing with First Home Buyers or second time buyers. That's been the problem that is clearly evident in everyone who's looked at what's gone on in the property market since the CGT concession came in.

[A]

Okay. And let's just do a little bit of a deeper dive I guess about how this change that you think Jim Chalmers is going to make, how this will impact investors. So is the idea that, okay, it's going to look less appealing for them to invest in secondary properties, therefore we're going to push them to spend their money where? Like is that the idea? They want to push investors to spend money in other areas and if so, where might this push investors to spend? Or is that not the idea?

[B]

Well that is, that would be one a bit of happenstance.

[A]

Okay.

[B]

Now some people might say why wouldn't you want investors investing in housing? As I've said, most of the time they're just buying existing dwellings. So this is where you get into an alternative which is to you change. You could actually keep the CGT system as it is but limit it to building established homes. Now anyone in the real estate market knows that building a new home, the capital gain that you're going to get is actually going to take a lot longer. You will need much more time to get a substantial capital gain as opposed to buying an inner city property in Sydney or Melbourne or Brisbane or Perth. And you can see huge capital gains in a very short period of time because normally these really expensive dwellings are in sought after places. That's part of the problem there. After the break, we are too wound up, too fascinated and invested far too much in our housing sector compared to everything else that you could sink money into and have a quality life.

[A]

Okay, well I want to ask you about how this change that we think Jim Chalmers is going to make to the capital gains tax, how that might affect the rest of us, us non investors, those of us, I joked with you beforehand who are just trying to pay our rent, our mortgage, trying to get through each day with our dignity intact, let alone making bank off of extra investments. So would any of this affect us? You know these investors, they'd be paying more tax on their capital gains if this change is brought in as we think it will be. So will the rest of us possibly benefit from this additional tax paid? Like will it maybe go to government programs that benefit us? Like what's going to happen with this extra mullah, Shane?

[B]

Well it may not be a lot of mullah and this is it. Like especially if you don't, if you grandfather people with existing dwellings and go forward, you're not going to get a huge amount of income quickly. So the argument that this is all about a cash grab doesn't hold up quite at this moment. But we don't know the full details as yet. But the more important thing is you are sending a signal to property investors saying, look, and this comes back to where Peter Costello was in 1999 saying, Cause ultimately investing, investing in inverted commas in property, property, new homes are not productive elements. They deliver you shelter a place to hang your photos of Kate Bush on the wall. But apart from that, they aren't overly productive elements. You want money to be going into. And this is where Costello comes in putting it into say businesses that want to expand and develop their own new operations which are going to employ people, make the country wealthier. So you are coming back to. And Costello was absolutely right in that thinking this is what we want. It was how he went about it fell apart fairly quickly. So that's, that's, remember, apart from say taxes and savings, Chalmers has said he wants to boost productivity in the economy. So at the margins, a change around CGT may help.

[A]

Okay, so changes to the capital gains tax though this is the hill on which other politicians have died. Right. So tell us how this arguably ended former labor leader Bill Shorten's political career, what he proposed in terms of his changes that he wanted to the capital gains tax and just how Palmer's. At least the reform that he's leaning towards, how it compares.

[B]

Yeah. So shorten went to the 2019 election saying he would halve the concession. He wanted to take the concession down to 25%. And he also had changes around negative gearing. And we haven't. Like this is still in the ether whether the government makes changes like limits negative gearing to just two, one or two properties. And this is where 80 to 90% of investors have one or two properties. Australia has too many landlords. It does because our tax system encourages you to take on holding property. The vast majority of people only have one landlord now. I've had landlords over the years. The bigger the pool of individuals, the bigger the chance you have of someone being unpleasant or not caring or not looking after the property like we are. We stand out in the rest of the world in terms of the proportion of landlords to the overall population. It's, it is weird and it's because of our tax system.

[A]

Okay. But this, this reform that we think Jim Chalmers will likely announce next month when he hands down the federal budget to capital gains tax is it going to make much of a difference? Because I'm just wondering like how minor is it? It's less generous I guess to investors than what Costello proposed. So it's obviously going back to the Paul Keating era. Is it going to make any difference?

[B]

So there has been some modelling around this. So at the one end is the say the housing sector which has an absolute vested interest in this whole case saying you'll have end up with 33,000 fewer homes over about four or five years. We're supposed to be building 1.2 million over that period. So a reduction is not what you want but 33,000 is not. It is not the end. It's not disaster and terrible. The Grattan institute reckons about 10,000 fewer homes over five years. That is absolutely minuscule and they estimate maybe you knock 1% off house prices. So back to our 1.75 million Sydney median house. You've taken $16,000 off it, something like that. So it's still $1.59 million which I still think is absolutely stupid but that's the going median price for a house in Sydney. So it is ultimately I know that people get really fixated and excited by tax. Your prime example here.

[A]

You know I do. You know I do.

[B]

You do. But at the end of the day the number of homes we build far, far more important where we build them the planning laws don't get me started on NIMBYs and YIMBYs interest rates they are the key determinants of how many homes you build. Then you've got population growth so the people arguing about immigration, that's another issue whether we have enough skilled workers to build the homes that people want. All these factors are really like I actually would rank them higher than the tax system and one particular tax like cgt.

[A]

Okay, well I guess just to wrap up then Shane, like what's public opinion at with regards to the capital gains tax? You know, are we overwhelmingly for it or not? Do we think it's going to bring about great change? Might we be disappointed when this eventually does come or do most people just not think about it at all?

[B]

People think about it. The commentary we've had this week on that story tells you that like we had a resolve poll this week which shows of a range of tax arrangements or tax changes double the number of people support reducing the concession on capital gains tax as opposed I think it's 42% say yes, 19% oppose which is that's a small number in opposition to something and they haven't but they haven't seen what else it means. So if Chalmers announces changes to negative gearing or a big increase in incentives to build more homes which may be funded by this, then you can see you're looking at whole tax package. And I think that's where you end up with Chalmers looking at a. Not just. If he just does CGT and negative gearing, then you'd be wondering this isn't really tax reform, it's tax, it's tax adjacent. Tax reform adjacent.

[A]

But do you think that it is going to be CGT plus the other changes? And assuming that is the case, will this actually at the end of the day help younger Australians to finally, you know, get that Australian dream, actually buy into getting a home?

[B]

Do you want the glass half full or glass half empty?

[A]

I want, I want, I want both. I want what you really think because you're bringing decades of experience to the. And this is what the listeners and myself and all of us want to know.

[B]

You would hope it does something, but you still want to see everything else, the housing. And this is where I'm glass half empty. Australia's economy is. The property market is our Achilles heel. We are too wound up, too fascinated and invested far too much in our housing sector compared to everything else that you could sink money into and have a quality life to think that the median house price is more than a million dollars in Adelaide, in Canberra, in Brisbane, in Sydney, in Perth, and it's almost there in Melbourne. You go, we have stuffed up. We have stuffed up the economy, we've stuffed up the opportunities for our young, for our next generation of people to get into the housing sector.

[A]

Okay, so that's post 7pm Shane, right? When the mood's gone down and you're feeling a bit grim about stuff.

[B]

Let me grab a glass of red.

[A]

Yeah, yeah, yeah, yeah. But though these changes are small and given everything you've said, are these changes the kind of thing that like in a decade, in 15 years, in 20 years, they will be moving things in the right direction?

[B]

I guess I'll cross my fingers, cross my toes. I'll find a rabbit's foot, maybe a four leaf clover.

[A]

Okay.

[B]

And say a few prayers.

[A]

Okay.

[B]

That's where we get to.

[A]

Okay, got you. Well, thanks, Shane, as always for your expertise on this.

[B]

It's always a pleasure talking to you, Sammy.

[A]

In other news today, the new United States submarine boss says the August Virginia class boats are not its priority and construction of Australia's submarines are lagging well behind. The tax office is introducing new changes that mean Australians could claim larger deductions for work related use of their cars. And our good Food team has carried out the ultimate supermarket Anzac Biscuit taste test. Find out which bickies come out on top on our websites. Smhortheage.com Today's episode was produced by Chee Wong, our executive producer is Tammy Mills and our podcasts are overseen by Lisa Muxworthy and Tom McKendrick. If you like our show, follow the Morning Edition and leave a review for us on Apple or Spotify. Thanks for listening.