It’s taken three decades, but Australia has slowly built one of the strongest retail investing cultures in the world.
Around 7.7 million Australians held exchange-traded investments outside their home and super in 2023, according to the latest ASX Australian Investor Study. That’s around 38 per cent of the adult population, almost double the participation rates that existed in the mid-1990s. Outside the US and Canada, very few countries have achieved anything close to that level of direct retail participation in financial markets. It’s something Australia should be enormously proud of.
As mum-and-dad investors got acquainted with big floats in the 1990s, such as Telstra, CSL and the ASX, retail investing has evolved and an entirely new generation has entered the arena through micro investing apps, online trading platforms and robo advisers.
People who had never previously considered investing suddenly started putting away $5, $50 or $500 at a time into ETFs, diversified portfolios and global markets.
Changing investor behaviour
At Stockspot we’ve seen this first-hand. Over 35 per cent of our 20,000 clients are first-time investors. They include teachers, nurses, students and tradespeople trying to build financial independence in a country where wage growth has struggled to keep pace with living costs.
Many of our clients are investing to achieve major life goals, particularly buying their first home. Last year alone, clients withdrew more than $37m towards home purchases. Assuming a typical 20 per cent deposit, that implies
our clients collectively purchased around $180m worth of property with money accumulated gradually through long-term investing.
That’s why the government’s proposed capital gains tax changes feel like such a profound mistake.
CGT changes could discourage Australians from becoming investors
Supporters of the reforms argue they’re about fairness. It’s true that wealthier Australians obviously receive larger dollar benefits from investment growth because they own more assets. But I think the debate has missed something much bigger, which is how these reforms could discourage ordinary people from becoming investors in the first place.
It’s also not lost on many younger Australians that many of the policymakers, commentators and industry figures supporting these changes built substantial wealth under the very system they’re now seeking to change. For many younger Australians, this feels less like fairness and more like the gate being swung shut just as they’re finally getting a chance to walk through it.
The first major issue is the proposed 30 per cent minimum tax rate on capital gains.
Under the current system, capital gains are taxed at an investor’s normal marginal tax rate after applying the 50 per cent CGT discount. That means people on lower incomes naturally pay lower effective tax rates when they begin investing, while higher-income earners still pay more. It’s a progressive system that allows students, part-time workers and people starting out to gradually build wealth without facing high tax settings before they’ve accumulated meaningful savings.
The new proposal changes that entirely. Even if you’re earning very little income, you would still face a minimum 30 per cent tax rate on gains. That creates a huge disincentive for people trying to build their first investment portfolio. At exactly the point where Australia should be encouraging financial literacy and long-term investing, we’d instead be telling people the system is stacked against them.
Government modelling
The government’s modelling also appears to dramatically understate the impact because it relies on Australian sharemarket capital growth assumptions of under 5 per cent annually. But investors today usually buy global ETFs, US technology shares, gold and other assets that have generated far higher capital growth over long periods. The higher the capital growth, the larger the effective tax burden becomes under the proposed indexation framework.
Then came the real bombshell. It emerged that only nominal losses (not real losses) can offset gains under the proposed framework. In practical terms, portfolios containing a handful of major winners alongside smaller losses could face much higher effective tax rates.
Once investors realise losses cannot properly offset gains in real terms, higher-risk investing becomes far less attractive. Money will increasingly flow toward broad diversified ETFs and large established companies, while money exits small cap shares, mining exploration, biotechnology and other sectors dependent on high-risk investment.
Australia’s public markets have historically played a huge role funding mining exploration, biotechnology and emerging business growth. These sectors depend on investors accepting that most opportunities will fail while a handful succeed spectacularly.
The risk
Many of Australia’s greatest listed success stories looked speculative and risky in their early years. Companies such as Fortescue, Afterpay, Pro Medicus and many others relied on public market investors willing to tolerate volatility and the possibility of failure in pursuit of extraordinary long-term successes. That’s exactly the kind of long-term risk-taking these tax changes undermine.
These reforms risk reversing decades of growth in retail investing participation as more Australians conclude the rewards no longer justify the risk.
That would be a tragedy, not just economically but culturally.
Because beyond economics, investing has always represented something bigger than just returns. It gives ordinary Australians a sense of ownership in the economy. It teaches patience, discipline and the value of long-term thinking, and it allows people without inherited wealth to slowly build financial independence over time rather than feeling permanently reliant on government.
Over the past 30 years, Australia taught millions of ordinary people how to become investors. These CGT reforms teach the next generation not to bother.
This article is adapted from an opinion piece originally published by The Australian – “Chalmers’ capital gains tax reforms unravels 30 years of ASX investor culture” (26 May 2026).
