While Jim Chalmers says 75,000 young Australians will be able to buy their first home as a result of changes, it could take up to a decade for negative gearing rates to come down.
Negative gearing - where a landlord can deduct losses on a rental property against their wages at tax time - will be limited to newly built homes from July 2027, with an exemption for properties bought before the announcement.
The 50 per cent discount on capital gains tax will also be overhauled, with the measure on existing properties to be linked to the current rate of inflation from July 2027, and a minimum tax rate of 30 per cent to be imposed.
The government has promised a $250 tax offset for all Australians earning a wage as a sweetener for the tax changes, but that won't hit pockets until July 2028.
Dr Chalmers said he was prepared for blowback from sections of the community.
"These changes are contentious. There's no use pretending otherwise, but it's the right thing to do," he told ABC Radio on Wednesday.
"The easiest thing that we could have done from a political point of view would be to see these challenges in the housing market ... and to leave everything exactly as it was and we didn't think that was an acceptable outcome."
The treasurer said it would take time for the full extent of the negative gearing changes to become clear.
"Typically, it depends on which modelling you rely on, but between five to 10 years, typically, a property will tip over from negatively geared to positively geared," Dr Chalmers said.
"That will phase out of the system, but people can continue to invest in new properties, because we desperately need to build more homes."
Gains on properties built before 1985 - which have previously been exempt from CGT - will also begin being taxed from July 2027 at the inflation-adjusted rate.
A 30 per cent minimum tax will also be imposed in discretionary trusts, which are often used by wealthy families to split income between family members and minimise tax.
Together, the changes to investment taxes will rake in an extra $8 billion, to be spent on the new offset for all workers and further relief for businesses and startups.
Prime Minister Anthony Albanese said 75,000 more people entering the housing market over the next decade was not too small for the extent of the tax changes being rolled out.
He repeatedly ahead of the 2025 election ruled out changes to negative gearing in a second term, but said the changes were necessary.
"We need to make sure that we don't say goodbye to the Australian dream this generation," he told ABC TV.
"We can't develop into a society where you can determine how successful people are by whether they're homeowners, some to own multiple properties, and others that are simply locked out of the market.
Opposition Leader Angus Taylor said while the coalition supported measures on small business, the tax changes were a broken promise.
"We think there's different savings. We think there's much better places to save rather than hitting Australians with higher taxes," he told ABC Radio.
"The budget papers show that the changes around negative gearing, capital gains and the trusts will dampen investment."
Shadow treasurer Tim Wilson said young Australians were being "kneecapped" by the tax changes.
"As they're saving for a deposit, they're going to pay higher rents," he said
"Then the government is going to apply more taxes on their first home deposit if it's invested, and they're going to then go on and build fewer homes, which means that it's going to be less likely young Australians will be able to buy one."
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