How younger Aussies could beat higher capital gains tax

There's no doubt the Federal Budget could end up doing the exact opposite of what it intended and make building wealth even harder for younger Australians.

But it might also help them discover ways to avoid paying the proposed higher capital gains tax.

Property already feels out of reach for many people under 40, which has pushed an entire generation toward shares, ETFs and crypto.

But now, with the proposed changes to capital gains tax and negative gearing, even long-term investing is becoming less attractive.

This is why it's no longer just about choosing the right investment.

The structure you invest through could become just as important as the investment itself.

There's one loophole sitting quietly inside the tax system that many Australians probably haven't thought about. Most people assume you only have two choices: buy assets and hold them, or don't invest at all.

But the tax office treats investors and traders very differently, and if CGT concessions become less attractive, that distinction suddenly matters a lot more.

If you're classified as an investor, profits are generally taxed under capital gains tax rules.

But if you operate as a genuine trading business, profits are typically treated as income.

That might sound like a technical detail, but it completely changes the game. More Australians may now start asking a question they never thought they would: "Should I stop acting like an investor and start operating like a business?"

To qualify, you generally need to show you're operating in a business-like manner with things like trading plans, records, active involvement and consistency.

A genuine trading business may also be able to claim legitimate operating expenses directly tied to generating income, including brokerage, software, internet, market data, accounting and education costs.

Superannuation could also become far more attractive.

Most younger Australians ignore super because retirement feels decades away, but if personal CGT concessions become less generous while super keeps its current tax treatment, it could become one of the most tax-effective investment vehicles available.

The old Australian model of "buy a house and wait" is fading fast. Governments can change tax rules overnight, which means younger Australians will need to become smarter and more strategic about how they build wealth.

That's because in the future, building wealth may have less to do with simply owning assets and more to do with understanding the rules of the game before everyone else does.

What are the best and worst-performing sectors this week?

The best-performing sectors include Consumer Staples, up more than 2%, followed by Energy and Financials, both up more than 1%.

The worst-performing sectors include Industrials, Utilities and Materials, all down more than 2%.

The best-performing stocks in the ASX top 100 include Computershare Ltd, up more than 8%, followed by ALS Limited, up more than 7% and Mineral Resources, up more than 6%.

The worst-performing stocks include Brambles Ltd, down more than 23%, followed by Eagers Automotive Limited and Greatland Resources, both down more than 8%.

What's next for the Australian stock market?

The All Ordinaries Index has been a battle between buyers and sellers so far this week. Before Thursday's session, the market was staring at a decline of almost 2%, but buyers stepped back in aggressively to help the Index recover to down less than 0.5%.

The encouraging sign is where buyers appeared. The 8700 level continues to act as a major support zone, with buyers defending that area for the third time since June last year.

That tells us institutions are still willing to step into the market when prices become attractive enough.

What's also important is the character of this pullback compared to the sharp sell-off we saw earlier this year.

Back in March, the market dropped roughly 10% in just four weeks, which was a fast and emotional decline driven by panic and uncertainty.

This current move lower has been far more controlled. The market is down around 4% over five weeks, suggesting investors are becoming cautious, but not fearful.

That distinction matters because sharp declines are often fuelled by emotion, while slower pullbacks can simply reflect profit-taking and investors reassessing the outlook after a strong run.

Right now, the market still looks more hesitant than broken.

Given that setup, I wouldn't be surprised if the market rises next week, assuming we don't see any major geopolitical escalation over the weekend.

Markets rarely move in one direction forever and after several weeks of steady declines, conditions are starting to line up for at least some form of a relief rally.

The Materials sector also continues to hold up remarkably well despite a modest pullback this week. That's important because Materials remain one of the key drivers of the Australian market.

Meanwhile, Financials, which looked weak last week, managed to stabilise and finish on a firmer footing.

If both heavyweight sectors regain momentum together, this could provide the fuel needed to push the broader market into its next rebound.

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