This year’s budget combines fiscal policy – taxes and spending – with a heavy focus on better regulation.

The budget deficit has fallen slightly from the mid-year update in December, to A$31.5 billion, but the budget remains firmly in deficit for the foreseeable future.

There are important reforms to capital gains tax, negative gearing and trusts. While the reforms are significant, the timing is cautious.

The capital gains tax discount – which currently halves the tax on gains made from buying and later selling assets – has made housing less affordable. Pre-budget rumours correctly predicted the time was ripe for this Howard-era policy to be reformed.

The discount will be abolished, replaced by an inflation adjustment for assets held for more than 12 months, with a 30% minimum tax on net capital gains. Changes will only apply to capital gains arising on or after July 1 2027, more than a year away.

The government will also limit negative gearing for residential property to new builds. This, too, will take effect from July 1 2027. The delayed start to the measures means revenue gains only kick in from 2028-29. But they are large, starting at $1.35 billion, rising to $2.28 billion the year after.

In the long term, these changes will help make housing more affordable and the budget more sustainable.

When asked in his budget lockup media........

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