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As Jim Chalmers was doing the round of the parliamentary press gallery on Tuesday, he was encouraging journalists to see the tax reforms in the budget as the most ambitious since the turn of the century.

The core of the tax package is that instead of paying tax on just half of profits on the sale of investments held for more than a year, we will return to the pre-1999 version where investors would get a discount based on inflation.

And from budget night, negative gearing is a thing of the past for new investors.

There are exceptions for investors in new builds because the government wants to encourage as much supply as possible.

The government is also planning to put a minimum 30% tax rate on income from discretionary trusts – a favourite vehicle for many wealthy households to minimise their taxes.

The treasurer in his traditional post-budget address on Wednesday said: “It’s clear that these concessions have fundamentally distorted our housing market.

“The current tax arrangements tip the balance against the first home buyers, and that’s why we’re changing them.”

But do they tip the balance back far enough to aspiring homeowners? Are the reforms as progressive as Labor claims?

A fairer tax system

Some experts believe the true benefit of these tax reforms is not that it improves housing affordability to any extent, but that it makes the taxation system fairer.

The budget papers show how since the turn of the century, the top 1% of earners received an average total tax benefit of more than $730,000 from the 50% CGT discount, negative gearing and the sweet tax deal from discretionary trusts.

The next 1% of high earners over the two-plus decades received a much lower average benefit of $152,000.

And by the time you get to the median taxpayer, it was just $12,400.

It’s clear, then, that the reforms in Tuesday night’s budget will restore that balance starting from now – but it will not right the wrongs of the past.

By protecting the massive profits of existing investors from the new rules – an approach known as “grandfathering” – Labor has not gone as far as many would like, particularly those who missed out on decades of concessional tax arrangements.

Economists had argued that “grandfathering” the tax changes would have created more space in the budget for tax relief for workers.

The expectations gap

For all the hype around Tuesday’s budget, the reality is that the struggle for first home buyers will be the same today as it was before Tuesday’s budget.

As Ken Henry, the former Treasury secretary and long-time reform advocate, writes, “this budget doesn’t fix everything”.

But it does “take a very big step… in the right direction”.

Saul Eslake, an independent economist, takes a similar line.

“Although the tax changes contained in this week’s budget won’t solve Australia’s housing crisis on their own, they will over time make a meaningful contribution towards solving it,” Eslake says.

So why has the opposition leader, Angus Taylor, vowed to oppose the tax changes, and even repeal the changes on their return to government?

Tim Wilson, the shadow treasurer, told 4BC radio on Wednesday that Labor’s tax changes would actually hurt young Australians’ capacity to build the wealth they need and get into the property market.

“I’d say they’ve knee-capped young Australians, in particular,” Wilson said.

“Young Australians have just had the ladder of opportunity ripped up from them before they can get the first foot on the rung.”

So by denying the next generation the tax breaks enjoyed by their parents, have Labor actually made it harder for younger Australians to get ahead?

For some, the answer is probably yes. But it’s a relatively small group.

Figures from the Australian Bureau of Statistics show that since 2019 around 6%, or about one in 20 first home buyers, were investors.

Besides one particular enthusiastic period in 2021, there have typically been 7,400 new first home investors a year since 2020.

Not all of those will be negatively geared, but many will and all will be betting on selling the property for a healthy profit at some stage to generate a deposit for a home in which to live.

To the extent that future first home buyer investors will no longer benefit from that “rent-vesting” strategy thanks to the ban on negative gearing, they are being disadvantaged.

Chalmers was asked about this a number of times on Wednesday and among his more practical responses was that anyone who wanted to negatively gear a property should invest in a newly built home – which is the exception to the new rules.

“It’s essentially an argument to go further. But we think we strike the right balance here. We think getting another 75,000 Australians and most likely, primarily younger Australians, into the housing market, is a very good thing to do,” he said.

Biggest tax reform in a quarter of a century?

It’s not all spin, although for many younger Australians, the impact won’t match the rhetoric.