SYDNEY — Young Australian investors could lose more than $50,000 in potential profits over the next three decades under the federal government's planned changes to capital gains tax, according to new modelling that has sparked widespread concern among first-home buyers and emerging wealth builders.

The proposed removal or reduction of the 50% capital gains tax discount — a longstanding incentive that has encouraged sharemarket and property investment — forms part of the government's broader strategy to reform the tax system and address housing affordability. Independent analysis commissioned by industry groups shows the changes would significantly erode long-term returns for investors starting with modest portfolios in their 20s and 30s.

The modelling, released Wednesday by the Australian Investors Association and independent economists, assumes a typical young investor contributes $500 per month into a diversified portfolio with 8% average annual returns. Under the current 50% discount, that investor could expect substantial tax savings when realising gains. Without the discount, cumulative tax costs rise sharply, potentially stripping more than $50,000 from final wealth by age 55.

"For a generation already struggling with housing affordability and stagnant wage growth, this change feels like another barrier to building financial security," said Sarah Thompson, policy director at the Australian Investors Association. "We're not talking about wealthy speculators. These are everyday young professionals trying to get ahead through disciplined investing."

The government has defended the reforms, arguing the discount disproportionately benefits high-income property........

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