Seven questions Treasury must answer about Australia’s new CGT reforms

There’s an old saying in financial modelling: garbage in, garbage out.

A model can run to hundreds of pages but it’s only as reliable as the assumptions behind it. Measure the wrong thing, or assume people won’t change their behaviour, and the results can look very different from what happens in the real world.

That’s what I fear is happening here, with rushed legislation that is underpinned with, at best, questionable methodology.

These changes will have a seismic impact on how Australians invest and where capital flows. Yet Treasury is asking Australians to trust its assumptions rather than disclose its analysis.

That leaves at least seven serious questions unanswered. If Treasury’s assumptions are wrong, the reforms may produce very different outcomes from those the government has promised.

1. Taxing real gains but ignoring real losses

The government says investors should pay tax only on gains above inflation. That sounds fair but the problem is that it hasn’t applied the same principle to losses.

Imagine an investor puts $100,000 into each of two companies. After inflation, one makes a real gain of $50,000 and the other suffers a real loss of $50,000.

Economically, the investor has made nothing. Yet the tax treatment recognises the indexed gain while only allowing a nominal loss that ignores inflation.

Taxing the winners more heavily without recognising the full economic cost of failure means less capital for biotechnology, mining exploration, start-ups and other risky businesses.

It will also encourage investors to use pooled ETFs, where gains and losses can be managed internally before taxable distributions are made.

Question for Treasury:

Undercounting young investors

Treasury played down the impact on younger Australians by suggesting only one in 10 people under 35 owned shares.

That figure appears to have been based on the number of people reporting Australian dividend income.

In selling the Budget, the Treasurer repeatedly claimed that only “1 in 10” Australians under 35 own shares, including in his interview with @BilliFitzSimons.

That figure appears to come from Treasury modelling (later released under FOI), showing that 11% of taxpayers under 35… pic.twitter.com/QHmNPIEAag

— Chris Brycki (@chrisbrycki) July 20, 2026

Dividends aren’t a reliable measure of share ownership. The figure misses people who own growth companies that don’t pay dividends. It can also miss income from international ETFs and says nothing about cryptocurrency.

Treasury used a measure designed around Baby Boomers to dismiss the impact on younger generations.

Question for Treasury:

3. Ignoring the valuation bill

The reforms treat gains made before and after July 1, 2027, differently. Affected assets therefore need a value at the dividing line.

Listed shares are easy but private businesses, property and other unlisted assets aren’t.
Treasury’s alternative formula assumes assets grow smoothly, even though private businesses rarely do. Taxpayers must now choose between paying for a professional valuation and risking a formula that produces a much larger tax bill.

In one example I examined, that choice changed the potential tax outcome by more than $500,000.

Treasury counted the expected revenue. It seems to have paid far less attention to the valuers, accountants and lawyers Australians will need to pay.

Question for Treasury:

4. Cherrypicking international comparisons

Treasury says Australia’s proposed capital gains tax rates are consistent with comparable countries.

But its comparison is heavily weighted towards higher-tax jurisdictions. It included California, Britain, France, Denmark and Ontario. It omitted lower-tax alternatives such as New Zealand, Singapore, Hong Kong, Switzerland and the United Arab Emirates.

Even within the United States, it chose California rather than Texas or Florida.

Compare Australia only with places that tax investment heavily and our new higher rates will naturally appear normal. In the real world, capital and founders compare all their options. As I’ve argued, these settings risk leaving Australia better at protecting yesterday’s wealth than creating tomorrow’s prosperity.

Question for Treasury:

Pretending landlords won’t pass on higher costs

Treasury forecast that the changes would increase median rents by less than $2 a week.

NAB has since estimated that rental yields would need to rise substantially more to compensate investors for losing the concession.

The adjustment may be shared between higher rents, lower prices and reduced investor returns. But investors won’t absorb a permanent fall in returns without changing their behaviour.

If the reforms reduce the supply of established rental properties, part of the cost will eventually fall on renters.

Question for Treasury:

6. Assuming investors won’t change their behaviour

Treasury’s revenue forecasts depend on how investors respond. Higher CGT may cause people to hold assets for longer, shift capital overseas or avoid investments where gains are uncertain. If the behavioural assumptions are too conservative, the expected revenue may never eventuate.

Questions for Treasury:

7. Ignoring the cost of locking up capital

Higher tax on realised gains encourages investors to hold existing assets rather than sell and reinvest. This lock-in effect can reduce liquidity and stop capital moving towards younger businesses and more productive opportunities.

Question for Treasury:

Parliament may have passed the first tranche of these reforms but that shouldn’t end the scrutiny. Treasury should answer these seven questions and publish enough of its assumptions for Australians to test the answers.

Australians deserve to see what Treasury fed into its model before they’re forced to live with what comes out of it.

This article was originally published as an opinion piece for The Australian – Crucial questions Treasury must answer about its CGT reforms (02 September 2026).