$50 Billion Tax Overhaul, Inheritance Tax Debate and Cuts to Capital Gains Discounts: Australia Signals Serious Reform — Sydney Auction Clearance Rate at 60%

Week’s Key Focus

Australia’s federal budget may never return to surplus — that is the warning from some of the nation’s leading budget analysts. At the same time, pressure is mounting on the Albanese government to pursue far more aggressive reforms, including a $54 billion overhaul of the personal income tax system and cuts to property-investor tax concessions.

As Prime Minister Anthony Albanese signals that next year’s federal budget will mark the beginning of long-term economic and social reform, Deloitte Access Economics says that without major structural changes, the budget will remain stuck in deep deficit for decades, ultimately forcing younger taxpayers to shoulder the consequences of the government’s failure to correct fiscal imbalances.

Treasurer Jim Chalmers will hand down the Mid-Year Economic and Fiscal Outlook (MYEFO) next week. In March, he forecast a $42.2 billion deficit for this financial year, improving gradually toward a surplus in the middle of the next decade. Government gross debt currently sits at $957.9 billion and is expected to surpass $1 trillion by mid-2026.

Deloitte estimates a slight improvement in this year’s fiscal position, with the 2025–26 deficit narrowing to around $38.9 billion. But co-author and Deloitte partner Cathryn Lee warns that next year’s deficit could widen by at least $7 billion, and that structural weaknesses mean the budget may never fully recover. She notes that fiscal outcomes have become overly reliant on unexpected surges in tax revenue. “The key is taking more disciplined, long-term action to repair the budget — including tighter spending control and meaningful tax reform.”

Tax reform must go much further, analysts say

Since taking office, the Albanese government has enacted only modest reforms — adjusting Stage 3 tax cuts, introducing two small reductions, and tightening concessions for super accounts above $3 million. Deloitte argues that these measures fall far short of what is needed to repair the budget, lift productivity, and reduce the burden on younger taxpayers.

Deloitte proposes five major reforms, including:

1. A full redesign of the personal income tax system (annual cost up to $54 billion)

Lift the tax-free threshold from $18,200 to $33,000
Introduce a 33% tax rate for incomes from $33,000 to $330,000
Retain the 45% rate above $330,000
Index all thresholds annually by 2.5%

2. Reduce the corporate tax rate to 20%

(with a new excess-profits tax)

3. Broaden the GST base

4. Introduce a 10% inheritance tax

Exempt estates under $100,000
Exclude the family home

5. Cut the capital gains tax (CGT) discount from 50% to 33%

Deloitte notes that reducing the CGT discount could raise $4 billion a year and help improve housing affordability. Deloitte partner Stephen Smith says: “The budget’s dependence on personal income tax must change. We need the courage to begin a conversation about capital and wealth taxation.” He warns that maintaining the status quo will worsen intergenerational inequality, placing an excessive tax burden on young workers.

Government response: More reforms coming before next year’s budget

Treasurer Chalmers says the government is already pursuing economic reforms through competition policy, AI regulation, and new environmental rules, and that additional measures will be announced in next year’s budget.

On the $150 energy rebate set to expire at the end of the year, he suggested it may not be extended, saying the payment was always intended as “temporary relief.”

Albanese added that whether the rebate continues will be decided before MYEFO. Responding to calls for deeper reform, he said:

“This year is the beginning of our reform journey, not the end. We will consider all policy tools before the next budget.”

Auction Results Last Week

Sydney:1,302 properties were scheduled for auction, with 894 results reported. A total of 532 properties were sold, resulting in a clearance rate of 60%. The total auction value reached AUD 640,770,920, and the median house price was AUD 1,600,000.

Melbourne:1,560 properties were scheduled for auction, with 1,145 results reported. A total of 732 properties were sold, giving a clearance rate of 64%. The total auction value reached AUD 540,785,354, and the median house price was AUD 967,000.