- Critics of the federal budget investor tax regime say young people will lose out on tax advantages enjoyed by earlier generations
- Changes to negative gearing and capital gains tax concesssions will not be as generous to new and future investors
- Some have dismissed the budget's claim of addressing 'intergenerational fairness'
Despite being billed as the "intergenerational fairness" budget, critics have been quick to point out young investors will also be punished by the new investor tax regime announced in the federal budget.
This includes young Australians holding shares and ETFs (exchange-traded funds) as well as those considering rentvesting, the strategy of purchasing a lower-priced investment property while renting elsewhere as a way to enter the housing market.
Australian Shareholders Association CEO Rachel Waterhouse said while intergenerational fairness is an important objective, the reform needs to work in practice.
"Many younger Australians are investing in shares and ETFs because entering the housing market has become harder," she said.
"Changes that increase the tax burden on long-term investment outside property risk making it harder for young Australians to build wealth, rather than improving intergenerational equity."
How many young Australians are investors?
This has been the million-dollar question in the rough and tumble of post-budget debate.
Federal Treasurer Jim Chalmers cited Treasury data showing one in 10 people under 35 owned shares.
But a 2026 ASIC report on the financial behaviours of Gen Z, which relied on survey data, found one in five people aged under 28 owned them.
When the discrepancy was pulled apart, it seems the Treasury figure came from income tax data and reflected 'taxable events' - such as dividend payments or capital gains from selling - not ownership of shares.
New research from Vanguard Australia found almost half (45%) of Gen Z and Millennials are investing in shares, ETFs, or other investment products.
This lines up with new research from online bank ING showing Gen Z (46%) and Millennials (43%) lead the way in planning to buy shares or ETFs this year.
What about rentvesting?
The figures on rentvestors are harder to pin down from available data.
New Reserve Bank of Australia data on housing investors found the share of housing investors aged under 30 has slipped to under 5%, down from around 9% in 2000.
Those under the age of 39 account for just over one in five property investors compared to 36% in 2000.
With the scrapping of negative gearing for new purchases of existing residential properties, rentvesting becomes less attractive for young people looking for a backdoor way to enter the housing market.
Enter the young investor industry
Although the tax landscape has changed for investors, it seems young people believe investing is essential to their financial futures.
New research from microinvesting platform Raiz Invest found almost seven in 10 young Australians (69%) believe investing is essential to getting ahead, yet only one in three (32%) intend to invest in the next 12 months.
As you might expect, Raiz Invest head of product Tom Nguyen is urging young people not to be inactive despite the uncertainty surrounding the tax changes.
"The priority for young Australians should be building financial habits early because consistency and education will matter more in the long term than timing policy change," he said.
Perhaps a harder sell amid the early days of the new tax regime, Raiz is promoting a new 'Get Invested' learning module for Gen Z audiences across various social media platforms.
The ladder is pulled
But others in the young investor landscape believe the ladder to building wealth has already been pulled up, leaving younger generations behind.
Associate Australian investment specialist with global investment firm Morningstar Simonelle Moody said the tax changes entrench a two-tier system.
"Long-standing investors retain one of the most generous tax breaks in the country, while new buyers enter a market where established homes no longer come with negative gearing benefits and long-term capital gains are indexed rather than halved," she wrote in her Young & Invested column.
"The effect is that the advantages of the past are being persevered for those who already hold them."
Ms Moody is also critical of the new minimum 30% CGT floor which she said will apply no matter a person's income or how little they make on any asset they sell.
"Younger Aussies have increasingly relied on the share market to build wealth," she said.
"For many, it has been the only realistic way to save for a deposit in a housing market they can’t afford to enter. Now those same young investors will face higher CGT on the few tools they can realistically access."
The treasurer fights back
But federal treasurer Jim Chalmers is unrepentant.
He said under existing CGT settings, shares had been "undercompensated" for two decades, arguing it was better to invest based on economic outcomes rather than tax outcomes.
Dr Chalmers also said prospective rentvestors would still be able to access negative gearing benefits on newly built homes.
He said rentvestors represented a small percentage of people aged under 35.
"They can continue to do that for the home that they already own, and they continue to do that in the future for new builds which would be a very positive contribution that they would be making to our communities," he said.
What are the new tax changes for investors?
Among the biggest changes will be the scrapping of the 50% discount on capital gains tax (CGT), replacing it with an inflation-indexed system and a minimum 30% tax floor.
This will apply from 1 July 2027, with assets held before that date still being taxed under the old system on a time-apportioned basis before the new calculation applies. The minimum 30% tax will apply to gains accrued after 1 July 2027.
Negative gearing tax benefits for those buying existing residential investment properties will also end on 1 July 2027 for any properties purchased after budget night (12 May 2026) but will remain in place for those who'd already owned investment properties and for those purchasing new properties going forward.
The legislation to institute the changes is currently passing through federal parliament.
For more on the tax changes: The Savings Tip Jar podcast - How the federal budget affects young savers, with Independent federal member for Bradfield Nicolette Boule.
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