An expected reversal of a key Labor pre-election pledge ruling out changes to the capital gains tax discount and negative gearing has triggered backlash from the Coalition over what it calls a “breach of trust” with voters.
Treasurer Jim Chalmers has not officially confirmed the tax reforms, which are expected to be contained in the forthcoming federal budget, but told ABC Radio National the government’s had made efforts to “rebalance” the tax system.
“What the tax package recognises and all of the reforms that we will be embarking on is that the status quo in the tax system and in the housing market isn’t working,” he said on Tuesday.
When asked about the prospective tax changes, Finance Minister Katy Gallagher would not pre-empt the announcement but told the ABC the budget would examine “all the levers available” to address what she described as an entrenched housing issue.
She said the budget was about putting “fairness at the centre”.
A Greens-led senate inquiry found in March that the CGT discount skewed home ownership towards investors, disproportionately benefited wealthier Australians and distorted productive investment.
But opposition defence spokesman James Paterson questioned how Labor could be trusted after Mr Albanese repeatedly ruled out changes to the housing tax concessions before the last federal election.
“The broken promise is bad enough. They looked Australians in the eye dozens of time before the last election and said they wouldn’t do this, and now they’re doing it,” Senator Paterson told Channel 9.
“I think that does breach faith for the Australian people, but how can we trust that it will end here?
“Next time when they say they won’t get rid of grandfathering for negative gearing, they won’t tax the family home, they won’t introduce death duties, how can we take them seriously, given that they lied about this and so often?”
The Coalition has said it will not provide its official position, including on tax settings, until the budget has been delivered by Mr Chalmers on Tuesday evening.
But opposition finance spokeswoman Claire Chandler described taxes as a “disincentive” and told the ABC: “You don’t make more of something by increasing taxes on it”.
“If we need more houses in this country, let’s build more houses. Let’s not start taxing them,” she said.
Chalmers to hand down fifth budget
Several announcements have already been made ahead of Tuesday’s budget, including a massive uptick in defence spending over the next decade, a new national counter-terrorism centre, and big cuts to the NDIS.
An extension to the fuel excise – slashed when the Iran war sent prices spiralling – is also understood to be potentially included.
The budget bottom line is also expected to be $44.9bn stronger than forecast in December, and more than $250bn stronger than what the Albanese government inherited when it was first elected in 2022.
The budget is expected to show that deficits are lower in every year compared to both the mid-year budget update in December and what the Albanese government inherited in 2022.
The bottom line is forecast to be $263.8bn better than what was inherited that year.
That is driven by a further $63.8bn in savings and reprioritisations.
Finance Minister Katy Gallagher said the government had made “responsible decisions” to improve the budget while continuing to invest in services.
The government has been under fire for its spending, with some economists and the opposition accusing it of fuelling inflation, which has risen to 4.6 per cent – well above the Reserve Bank’s target of between 2-3 per cent.
The RBA last week increased the official cash rate for the third time this year, pushing it to 4.35 per cent.
The yearly budget comes amid a period of heightened uncertainty for Australia and the world as the war in the Middle East continues to rattle global markets and puts pressure on inflation.
Mr Albanese told the Labor caucus on Monday in a pre-budget pep talk that “a responsible government need(s) to be prepared to make tough decisions”.
More to come
