Jim Chalmers knew he would be branded a liar as he prepared the budget. He and Prime Minister Anthony Albanese conceded 39 times in less than a day that they backflipped on their election promises to leave property investor taxes untouched.
The Coalition has swiftly vowed to repeal the curbing of capital gains tax concessions and negative gearing — although it would keep the $250 Working Australian tax Offset, which will cost more than $23 billion over a decade.
The budget proposes raising a net $77.2 billion in taxes over the next decade by lifting the rates levied on oncomes from trusts and capital gains to a minimum of 30 per cent and restricting negative gearing.
The capital gains discount and negative gearing changes will be grandfathered, and the older, more generous version can still apply to newly built homes.
Dr Chalmers conceded the changes — explicitly ruled out repeatedly during last year’s election — were “contentious” but the right thing to do.
“We expect that that charge will be levelled at us,” he told the National Press Club when asked why voters shouldn’t think they were just another lying government.
“The worst thing to do, the easiest thing to do would be to leave things as they are, and understand that the longer we leave things, the worse they get.”
The Treasurer and Prime Minister started their post-Budget sell standing outside in the crisp pre-winter Canberra morning and explaining umpteen times, yes, they did break a promise.
“We’ve changed our position,” was Mr Albanese’s euphemism of choice, repeated 21 times in media interviews and several more during Question Time.
Dr Chalmers went with, “We have come to a different view,” some 18 times.
“We think getting another 75,000 Australians, and most likely, primarily, younger Australians, into the housing market is a very good thing to do. It’s worth the political risk,” he said.
Opposition Leader Angus Taylor was far blunter.
“My question is to the Prime Minister: Why did Labor lie to Australians about your plan to tax them more?” he opened Question Time.
Earlier, he said the Coalition would repeal the changes if elected.
“Absolutely, our position is we’re going to do everything we can to stop these bad taxes, toxic taxes, from getting through the parliament,” he told Sky on Wednesday.
“We’ll do whatever it takes to roll these taxes back.”
Shadow treasurer Tim Wilson said the changes, “by the confession of their own documents” would push up rents, “knee-capping” young people who were trying to use investments to get together a home deposit, and cut the number of houses being built.
“We’ll repeal these measures if necessary,” he said.
Dr Chalmers used his speech to the National Press Club — the 52nd post-Budget address the institution has hosted — to explain how that change of mind came about.
Over the summer he was thinking primarily about business tax reforms, scribbling notes “on planes and in the backyard, one eye on the kids in the pool”, but this evolved during conversations with colleagues and others who had been involved in last year’s economic reform round table.
The shift to contemplate capital gains, negative gearing and trusts came on slowly but the final decision to change the policy was only taken “either towards the end of April or perhaps the beginning of May”.
“We were thinking about tax reform over the summer; there wasn’t a moment where we completely switched into considering some of these sorts of issues, but the decision was taken relatively recently to change our policy,” he said.
Earlier, Mr Albanese said it was the gradual realisation that despite having “thrown everything at the housing market . . . it still wasn’t enough to get young people, in particular, into the housing market” that led to the decision to go further.
Without the Coalition’s support, the Government will need to turn to the Greens to turn the tax plans into law.
Mr Albanese said he wanted to see them pushed through as soon as possible, ideally before Parliament rises for winter.
But the Greens are lukewarm on the idea, saying the proposed changes are a step in the right direction but won’t go anywhere near far enough to properly tackle intergenerational unfairness.
In particular, they don’t want existing tax arrangements grandfathered.
“They’re trying to be clever here, but it’s a bit of a con, because they’ve kept 95 per cent of these property investor tax perks, and there is nothing in this budget for renters,” leader Larissa Waters said.
One Nation leader Pauline Hanson accused the Treasurer of stripping baby boomers of the wealth they had worked hard to accumulate – “We had to have second-hand furniture, second-hand clothes… we didn’t go to restaurants, and we didn’t have all this” – and handing it to others.
Dr Chalmers said some of the arguments put to him about the broken promise — such as the Treasury modelling showing they’ll only help 75,000 new people to buy homes over the next 10 years, a fraction of the 1.1 million first-home buyers over that time — were actually making the case to go even further.
He’s flagged using some of the $77 billion over the longer-term to give more tax cuts to working people now that Labor has set up a mechanism to target relief on wages income.
And he failed to rule out coming back to taxing franking credits — one of few Labor tax policies that hasn’t returned from the 2019 election purgatory — saying only that it wasn’t part of this package.
A very happy sounding Bill Shorten said he felt vindicated by the adoption of tax measures he championed in Labor’s losing 2016 and 2019 election campaigns.
“I think that we were probably ahead of our time, and I do think this is important for the nation,” said the former Labor leader, now University of Canberra vice-chancellor.
He said the fact Labor was now in government combined with the shift in demographics and attitudes towards capital gains tax and negative gearing since 2019 gives him more confidence the Government will successfully make the changes now.
“I think the great Australian dream of owning a home is a worthy one, and needs to be that that flame needs to be kept alive, not smothered under a tax system,” he said.
“The core of this whole story is a simple proposition . . . Why is it that a plumber, a nurse, a journalist, a lawyer, a teacher, a doctor, pay higher rates of tax when they go to work every day than someone who just sits on a pile of assets and just sells them down the track and gets taxpayers support in between?”
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