Costello Says Albanese’s Capital Gains Tax Change Threatens Youth Wealth

TL;DR: Former finance minister Peter Costello warns that the Albanese government’s plan to eliminate the 50% capital gains tax discount will push Australia’s investment taxes into the world’s highest tier and limit wealth‑building for younger Australians.

The federal budget released this week proposes to remove the capital gains tax (CGT) discount that has been in place since 1999. The discount allows investors to halve the tax on profits from assets held longer than a year. Its removal would raise the effective tax rate on such gains to the full marginal rate.

Costello, who introduced the discount as treasurer in 1999, called the move a “backflip” by the Labor Party. He noted that the party supported the reform when it passed parliament nearly three decades ago. By scrapping the discount now, Costello argues, Labor is abandoning its own policy legacy.

The former treasurer also claimed the proposed change would place Australia among the highest‑taxed developed economies for investment income. He said younger Australians would lose the same tax advantage that older generations and current Labor politicians have used to grow wealth over time.

If the discount is removed, a 30‑year‑old investor who sells a long‑held property could see the tax on the profit rise from roughly 15% to 30%, depending on their income bracket. For small‑scale investors, the higher tax could deter participation in the property market, shares, or superannuation (retirement savings) investments.

Economists note that higher CGT rates can reduce the incentive to hold productive assets, potentially slowing capital formation. However, the government argues that eliminating the discount will raise revenue for infrastructure and social programs, and improve tax fairness by treating capital gains like ordinary income.

The debate highlights a broader clash over intergenerational equity. Costello frames the issue as a loss of opportunity for the next generation, while Labor positions the change as a step toward a more progressive tax system.

What to watch next: parliamentary votes on the budget amendment, potential compromises such as a reduced discount rather than full removal, and market reactions from property and equity investors.