Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Assistant Minister for Immigration) Share this | Hansard source

There are three challenges facing the Australian economy: an unaffordable housing market; low productivity growth, that is hampering increases in living standards; and the demographic challenge associated with an ageing population. Our reforms in the budget, particularly to the taxation system, are aimed at curing these ills, ensuring that Australia is a productive, growing economy where living standards are increasing for all.

Our housing market is a market that is broken. When a nurse, a teacher, a police officer or an early-childhood educator is paying more tax than someone who is earning millions of dollars in buying and selling assets, then the system is broken. And that is exactly what is occurring at the moment.

Our taxation system does not incentivise productive work. It incentivises people owning and holding on to assets, and making windfalls from asset appreciation. That is the reason why we have low productivity growth in Australia and, potentially, lower living standards. So we are changing the system that is broken into one that supports hardworking Australians, not one that punishes them simply because they can't afford to buy investment assets. We want to see workers get a fair go from the taxation system, not to be punished the harder they work.

The Liberals, the Nationals and One Nation are working together to oppose our reforms. They want to keep the broken system. They want to maintain the status quo—a system that is broken and that punishes hardworking Australians who are trying to get ahead, and yet, at the same time, is providing large tax concessions for people who are making millions from buying and selling assets. They want to prop up a system that is actually increasing wealth inequality in Australia and seeing workers and families being left behind.

We are determined to fix this broken system, to ensure that our taxation system supports workers who are trying to get ahead, rewards aspiration and ensures that aspiration isn't confined to people who can afford to buy investment properties, and to ensure that our tax system promotes productive work in our economy. How are we going to do this? Well, we're proposing to reform the taxation system so that it promotes productive work rather than concessions for people who are buying and selling assets. One way that we're going to achieve this is by reforming negative gearing in the property market.

Anyone who currently owns an investment property and who owned it up until the point of the budget night is not affected. So you don't need to be anxious based on the Liberals' mistruths. You need to make sure that you understand the facts. And the facts are that, if you had an investment property before budget night, you are not affected; you can continue to negatively gear your property. But, from budget night, there will be changes in respect of negative gearing. They are that, from 1 July 2027, negative gearing will still be available, but for new builds—off-the-plan developments that will add and encourage adding to the housing stock in Australia. So here we are changing the system so that it supports productive investment in our economy—namely, the construction of more homes for Australians and more building—rather than promoting people buying investment assets, sitting on them, selling them down the track and then getting a tax concession, in the form of a discount on the capital gains tax, to facilitate wealth generation.

That brings me to the second point of our reforms, and that is to capital gains tax. From 1 July 2027, we will reform the way that capital gains tax works. Instead of a 50 per cent discount on any gains, we will return to a cost base indexation and a 30 per cent minimum tax rate. This will ensure that only real capital gains are subject to tax in the future. Again, there have been some mistruths that have been spread by the coalition, One Nation and others. Indeed, there's been a meme campaign going around, started by a fella called Frank Greeff, who last week admitted that the memes that he started weren't actually truthful. He said:

Not all businesses are going to be taxed at 47 per cent, that's correct.

He also said:

That's just kind of what the truth of social media and attention is like, unfortunately, the more nuance you have, the quicker someone will scroll past and not really care about what you're saying.

So here you have the bloke who initiated the memes campaign about capital gains tax changes, admitting that what he was putting out there was actually false and not truthful.

Here are the facts about the capital gains tax changes. Firstly, if you operate a company, there is no change. Companies never received the 50 per cent discount on capital gains tax. Companies have always paid capital gains tax on assets that are sold, at the corporate tax rate of 30 per cent or the small-business tax rate of 25 per cent. That will not change. There's no change for companies.

If you operate your small business as a partnership or a sole trader or maybe through a trust, there are small-business exemptions under the current capital gains tax regime. If you are a small business with a turnover of less than $2 million, there are substantial exemptions from capital gains tax and they will remain. There's the 15-year operating exemption; the 50 per cent active asset reduction exemption; the retirement exemption—upon retirement, up to $500,000 of the proceeds of the sale of the business is exempt from capital gains tax; and the rollover exemption—if you defer and reinvest in a replacement asset, you are exempt from capital gains tax.

The majority of businesses in Australia will not be affected by the change. In fact, we're actually doing more. We're introducing new measures to provide more support for small businesses in Australia. From 1 July 2026, a business will be able to carry back tax losses and offset them against tax paid up to two years earlier. There's been a lot of talk about start-ups. Here's a reform that's supporting start-ups: from 1 July 2028, start-up companies with turnover under $10 million that generate a tax loss in the first two years will be able to convert that loss into a refundable tax offset. Small businesses operating through discretionary trust, who may face a 30 per cent minimum tax, will be afforded rollover relief for three years, from 1 July 2027, to support small businesses that wish to restructure out of discretionary trusts.

Here you have the facts about the changes that we are making to capital gains tax and negative gearing. The changes are all aimed at ensuring that the taxation system works for working Australians who are trying to get ahead. They aim to encourage people to invest in productive assets, rather than simply sitting on assets, waiting for price appreciation, making windfall gains and getting a tax deduction.

The second area where we need to improve is productivity. We want a tax system that encourages people to work and to try and get ahead, not punishes them the more that they work and for the longer hours that they work. We want to make sure that the tax system supports people who work longer hours by providing them with incentives rather than providing incentives for people who are relying on asset price inflation and appreciation for gains. So we're reforming the capital gains tax, as I mentioned.

We're also introducing a 30 per cent tax on discretionary trusts from 1 July 2028. The tax will be paid by the trustee, and the beneficiary will receive a non-refundable credit, similar to franking credits, for tax already paid. This is to ensure that we're stopping people who can afford it shifting income to family members and others to reduce their marginal tax rates and avoid paying income tax. Someone may be able to transfer their income to their kids or their partner through a trust to avoid paying their income tax. Currently, that's not taxed. It's untaxed. The majority of people who own and operate these discretionary trusts are in the top 10 per cent of income earners in the country.

Again, there have been mistruths spread about this. I want to correct those mistruths. These are the facts. Disability trusts, testamentary trusts, deceased estates and charitable trusts will be exempt from the changes. There'll be no additional tax burden on those particular types of structures. That's clearly outlined on page 31 of Budget Paper No. 1.

We will also introduce other measures to improve productivity—removing 1,000 nuisance tariffs; the $20,000 instant asset write-off; faster environmental approvals; modernising the energy market; faster skills assessment, particularly for migrants; reforming the points test for migrants; and a permanent two-year-loss carryback for firms with up to $1 billion in turnover. So here we are reforming the system again so it promotes productivity and cures one of those ills that we have in our economy at the moment.

These reforms ensure that we can generate additional revenue and budget savings. The revenue will increase by $44 billion to 2028-29 since MYEFO. We're also ensuring that there are savings that are outlined in our budget through reforms to the National Disability Insurance Scheme, to the way private health insurance operates and to uncommitted funding across programs. In total, there's $63.8 billion in savings in this budget alone. That will take pressure off Australians because we will be able to return some of those savings to Australians in the form of returning bracket creep. That's in the form of the two tax cuts that are coming over the course of the next two years, the working Australians tax offset, the $1,000 deduction and being able to halve the fuel excise at the moment while Australians are facing increasing prices at the bowser. Because we're making those responsible decisions, because we're reforming our taxation system and because we've been able to find savings, we're able to return some of the bracket creep to Australians in the form of lower taxes and additional incentives in our taxation system.

I want to conclude with an overview of the budget position because I think some of this has been lost in the discussion that's been going on around tax reform. We've actually improved the budget bottom line as well in this budget. We'll run a deficit of $31 billion over 2026-27. But, importantly, the budget will be $44 billion better off over the forward estimates compared to MYEFO. That is because of responsible economic management, finding savings in the budget and returning most of those savings to the budget bottom line. There'll be $63 billion in savings and additional revenue that will go to ensuring a better budget position because of this government's responsible management. Gross and net debt will be lower compared to MYEFO under this budget.

I also want to finish with some international comparisons about our budget position. These are outlined on page 93 of Budget Paper No. 1. The deficit that Australia will run in 2027 will be 2.1 per cent of GDP. I want to provide you with an international comparison to see where Australia sits. Canada's deficit is 2.5 per cent of GDP. The UK's is 3.1 per cent of GDP. The euro area's is 3.4 per cent of GDP, and the United States's is 7.4 per cent of GDP. When you look at our budget deficit in the context of international comparisons, the Labor government is doing a sterling job in managing our nation's finances and ensuring that we're on a pathway back to surplus in accordance with the outlines that we've measured.

The gross debt position is also very interesting as well. If you look at our gross debt position as outlined in the budget—again, this is all outlined on page 93 of Budget Paper No. 1—our gross debt is 50 per cent of GDP in 2027. How do we compare to other nations? In the Euro area, gross debt is 85 per cent of GDP. In the UK, gross debt is 100 per cent of their GDP. In Canada, it's 110 per cent of their GDP. In the United States, a whopping 130 per cent of GDP is their gross debt position. When you look at those figures, you see what an excellent job the Albanese Labor government is doing in managing our nation's finances and ensuring that we are returning any savings and additional revenue in the budget to the people of Australia to reduce their tax burden.

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