The Federal Budget has been handed down, including major tax changes that have been welcomed by unions, social services groups, and renters groups. Industry groups have raised concerns, saying the tax changes will be bad for business, as debate continues over how to balance fairness and fiscal restraint.
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TRANSCRIPT
Treasurer Jim Chalmers has framed his fifth federal budget around fairness, arguing global economic uncertainty has only boosted the need for reform, as well as spending restraint.
He says the budget balances debt, deficit, and the need to help with cost-of-living.
“We’ll limit negative gearing for residential property to new builds from July next year. And we’re replacing the 50 per cent capital gains tax discount with inflation-adjusted indexation, to restore the taxation of real gains.”
After weeks of speculation, the details of changes to how housing investments are taxed have been unveiled – and Dr Chalmers says they’ll help around 75,000 Australians into a home.
“It makes the tax system fairer and stronger for workers, business, first home buyers and future generations. Responding to the pressures of the here-and-now while embracing our intergenerational responsibilities.”
Those changes will be subject to a minimum 30 per cent tax on capital gains from July 2027, although, in line with the government’s push to increase housing supply, new builds will continue to attract a discount of 50 per cent.
While he welcomed a $2 billion commitment to help build infrastructure enabling infrastructure like roads and sewage, Property Council of Australia Chief Executive Mike Zorbas is skeptical the tax changes will address the fundamental issue - supply.
"They're a big roll of the dice that I hope is successful in creating new homes, but our previous modelling suggests not. Our previous modelling suggests that they will have a contradictory impact."
Australian Council of Social Service CEO Cassandra Goldie has welcomed the focus on fairness.
"I want to, firstly, warmly welcome the government finally moving on those property investor tax breaks. For far too long, the capital gains discount and negative gearing arrangements have fuelled housing unaffordability, and they have fuelled growing wealth inequality in this country, and the government has listened to the community, they've certainly listened to civil society - those who care about people with the least."
President of the Australian Council of Trade Unions, Michele O'Neil, agrees it's an important systemic change that will make a difference going forward.
"It's something that's been really unfair in Australia, that we've actually been taxing work more than wealth, so it's having to change the balance on that is an important measure. It's also the fact that we've got those new minimum tax to be paid on the discretionary trusts."
Those changes include a minimum 30 per cent tax discretionary trusts from July 2028 - a measure expected to raise $4.5 billion over five years.
"This is a fairness measure too, because people have been able to get away if you've got, you know can afford to pay a really smart tax accountant, and you've got money, then you've been able to spread the tax through different family members, and even the paying much less tax or no tax in some cases, whereas, working people pay tax and every hour, they work, they pay their fair share."
Discretionary trusts are also used by small business, and rollover relief will be available for small businesses wishing to restructure out of a discretionary trust, starting one year before the new tax minimum tax rate kicks in.
But Acting CEO of the Australian Chamber of Commerce and Industry David Alexander has said the budget will be a disappointment for Australian businesses.
Contradicting Jim Chalmers, he says the budget won't lift productivity and investment.
"Unfortunately, there are some measures in this budget that will impact negatively on businesses, particularly small businesses. The capital gains tax changes will impact on investment in Australia and send quite a lot of investment overseas. There's also taxes on trusts. Lots of small businesses use trusts, and they will have their incomes hit by this significant impost."
CEO of the Australian Industry Group Innes Willox is also concerned about what tax changes mean for business.
"The tax measures that the budget introduced is now make us the highest country in the world when it comes to capital gains tax, among the highest for income tax and among the highest for corporate taxes. we are now one of the highest taxing nations in the world."
Jim Chalmers says Australian workers will get significant tax cuts out of the budget - adding to more than $2800 for the average worker in 2028.
One of those measures is the $250 Working Australians Tax Offset, which will appear in tax returns automatically for over 13 million workers from the second half of next year.
It will be welcome news for many, but Cassandra Goldie has questioned whether that money could have been better spent.
"We think it was the wrong decision for the government to give a priority to the Working Australian Tax Offset. It will cost 3 billion. It will give $250 to people who are in paid work. But let's remember that is to every person who's in paid work, right up the income scale, right up to the top end in terms of people who are in salaried, paid work. But in this budget, once again, we've got about four million people who are on incomes so low that they don't even meet the tax free threshold, and they will get nothing from the WATO."
The Treasurer says hard decisions have had to be made in this budget, against the backdrop of soaring oil prices ignited by the war in the Middle East, protectionist trade practices, and other upheavals.
The budget also includes large spending commitments that had been pre-announced; $53 billion for defence over a decade, $10 billion towards fuel security; and a major funding agreement with the states on health.
The Treasurer has touted $63.8 billion dollars in savings - but much of that has come from cuts to spending growth in the NDIS.
As design of those reforms continues, debate about fairness and spending restraint will no doubt continue
