Treasury secretary Jenny Wilkinson reveals her department has spent year looking at capital gains tax changes

Australia’s Treasury chief has confirmed her department has done detailed economic modelling on diluting capital gains tax concessions for offloaded investment properties - with average new landlord mortgages at record highs.

Jenny Wilkinson revealed on Wednesday morning that Treasury had been assessing possible policy changes a year before her boss, Treasurer Jim Chalmers, last week hinted the upcoming May Budget would be announcing a scaling back of the existing 50 per cent discount, with the aim of tackling inter-generational inequality.

“Treasury has clearly been working on, clearly works with government on tax policy and tax reform and we have provided advice on tax matters as we do all the time over the course of this past year,” Ms Wilkinson told the Senate economics committee in Canberra.

Ms Wilkinson agreed with a suggestion from Greens senator Nick McKim that changing capital gains tax policies could affect demand from investors.

“Our assessment, that we have provided over time, has been that changes in some of these tax settings could, for example, change the balance of owner-occupiers versus investors in the market,” she said.

“I expect it might change the nature of demand.”

Finance Minister Katy Gallagher declined to elaborate on media reports policy work had been done that was yet to be publicly released, under questioning from Liberal senator Jane Hume.

“Who knows? The media works in very mysterious ways in this building,” she said.

The 50 per cent capital gains tax discount has been credited with boosting property values, with new Australian Bureau of Statistics data on Wednesday showing average new investor loans had last year climbed by 6.4 per cent, or $43,000, to a record $717,000. This annual increase was almost double that of wages.

But owner-occupier loans had even more growth, with average mortgage sizes increasing by 10.5 per cent, or $70,000, to an all-time high of $736,000, as of December 2025.

NSW has the highest average new mortgage of $873,000 for both owner-occupier and investor loans.

With a 20 per cent deposit, that would barely finance a loan for a $1.1 million house in western Sydney, a more affordable area of Australia’s most expensive market.

Last year’s reporting period also covered the October 1 debut of the 5 per cent deposit scheme for all first home buyers, regardless of income, if they bought a property within a specified house price cap for each capital city and region.

Labor’s fast-tracked scheme spares borrowers from having to pay lenders mortgage insurance if they don’t have a 20 per cent home loan deposit.

This saw the number of first-homebuyer loans soar by 9.1 per cent last year, with the 31,783 of property newcomers in the December quarter making up more than a third of the 88,990 owner-occupier mortgages.

In just three months, the number of first homebuyers surged by 6.8 per cent, compared with a 5.5 per cent quarterly increase in the number of new investor loans.

Over the year, the number of investor loans soared by 23.6 per cent to 60,445, making up 40.4 per cent of all new mortgages at the end of last year.

By value, investor loans were up 31.8 per cent on an annual basis and made up 39 per cent of all new lending in 2025, the highest level in eight years, with Westpac economist Neha Sharma suggesting they had rushed in ahead of the expanded first-home buyer scheme.

“Investors were trying to get ahead of the price growth that would result from the expanded deposit scheme,” she said.

The data covered the Reserve Bank of Australia’s rate cuts in February, May and August last year, but not this month’s increase just six months after the last easing.

Australia’s renters have been struggling with housing stress, despite the generous tax concessions for investor landlords that had been designed to boost the supply of available accommodation.

Since COVID, national rents have soared by 43.9 per cent, as wages increased by a much more modest 17.5 per cent in the five years to September 30, 2025, Cotality data showed.

“Before the pandemic, renters in many parts of Australia were seeing wages grow a little ahead of rents, or at least keep pace,” Cotality research director Tim Lawless said.

“Since 2020, a combination of tight vacancy rates, smaller household sizes and sluggish new housing supply has pushed the market into a very different phase, one where rents are clearly in the driver’s seat.”

Almost a year before the pandemic in 2019, Labor lost its second straight election with a plan to halve the 50 per cent capital gains tax discount to 25 per cent.

This would have meant that someone making a $100,000 gain on an investment property, owned for at least 12 months, would have been required to declare $75,000 of that increase on their tax return.

Since September 1999, this same investor making a $100,000 gain has only been required to declare $50,000 of that on tax, under laws introduced by former Liberal prime minister John Howard’s government.