Allegra Spender (Wentworth, Independent) Share this | Hansard source

I move:

That the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026 be referred to the Standing Committee on Economics for consideration and an advisory report by 31 July 2026.

The government, in the last budget, has put tax reform on the agenda. I think this is the right decision and I think it was a brave decision. This is difficult, and we have not had significant tax reform in this country for the last 25 years. I recognise the guts and the courage that it took to do that. But I think the government is making absolutely the wrong decision to try and push this through quickly. It is making the wrong decision to try and push this through without significant interrogation at the Senate or at the House level. And it is the wrong decision to try and push through legislation without dealing with some of the problems that the government itself recognises with the bill and its impact, in particular, on small businesses and those in the startup space.

This is not just wrong for the government. I think this is wrong, firstly, for the economy. If we don't get significant reforms right and if we don't deal with the issues, and there are issues with what the government has put forward, then this bill will not deliver what it needs to as well as it could for the economy. Secondly, it is wrong for the people. I can tell you people do not understand what the government has proposed, and until a broader part of the community understands and actually backs this—this is not fair, frankly, to the Australian people, and it's inappropriate. Finally, it is the wrong decision for reform more generally. It is hard to get tax reform on the agenda. It is hard to get decent reform on the agenda. But the answer, once you've made that decision, is not just to ram it through and hope for the best and hope that people get over their concerns. If it's done wrong and if it can't build the support that it needs to build, it will set back reform not only in tax but also more broadly across the economy. That is a bad outcome for this country.

I want to talk to you specifically about why I support reform, because there are people in this parliament and the country who say: 'No, don't touch anything. Everything's okay here.' I have to say, I don't agree. I have been one of the strongest proponents for reform in the tax system over the last four years since I have been here. It is absolutely right that reform is on the agenda if we care about building prosperity and we care about building fairness. We need both those things in our economy. When I look at the personal income tax system at the moment, I identify three significant concerns that I believe need to be fundamentally addressed.

Firstly, we know that the tax system taxes you most heavily when you have the least ability to pay. Talk to any young person. I'll give you an example. There are two households living next door to each other that are both on a hundred grand, but one is a retired household. They pay on average half the tax of a working-age household despite the fact that—I think these are the numbers—they are four times more wealthy, much more likely to own their own home, much less likely to have a HECS debt and much less likely to be battling with renting costs, trying to save for a deposit and all those kinds of issues. It's never going to be perfect, but I'd like a tax system that taxes people appropriately or taxes people less when they're trying to build wealth and when they have less capacity to pay.

Secondly, we know we have a tax system that is not sustainable. In decades past, we used to have about six people who were working for every person over the age of 65. We now have under four people. In a few more decades it's going to be under three people. We need a tax system that recognises that our overreliance on taxing wages is not sustainable. I look to a future where AI is also coming, and we do not know what impact that will have on jobs. I hope that it won't be negative. I hope it will build prosperity. But I certainly recognise that we can't have a system that is just built on trying to tax wages more. The problem in relation to sustainability is that we have a tax system, despite the challenges, which relies on different Australians to tax people less. For instance, about 27 per cent of older Australians used to pay income tax. That's now down to 17 per cent.

Finally, something that I think is absolutely clear is that young people are falling behind. It's not just down to the tax system. It has a lot to do with housing. There are a lot of issues in housing that are not due to the tax system. But we cannot pretend that the tax system doesn't play into housing. We cannot pretend that negative gearing has helped drive equity into the housing system. I don't believe that, and I don't think the statistics back that either. So we do have issues to face. Genuinely, from an equity point of view, when people say, 'Why should we change a tax system at all?' I ask, and I've asked this really strongly—if you earn a hundred grand in wages, you pay $23,000 in tax. If you earn it on capital gains, you pay about $7,000 of tax. If you can split it with a spouse and through a trust, you might pay about $13,000 worth of tax. If you earn it in retirement, when you're in the pension phase on your super, you pay zero tax at all.

I don't think those numbers work, but I also don't necessarily think where the government is going is right, because they've got a bunch of problems in their bill too. I think this is the debate we need to have. This is why this bill needs to be referred to the Standing Committee on Economics. We need a tax system that balances fairness and prosperity. We need a tax system that incentivises innovation and rewards risk taking and we need a tax system that is fair, where people can get ahead regardless of who your parents are. That is the balance that I believe this parliament needs to strike. This is a balance that I don't think the government has got right, and this is the reason why we need to look at this carefully and get it right this time.

I want to go now to the reasons why I have concerns with the government's current bill. These are economic concerns, concerns from a fairness point of view and concerns from a prosperity point of view. The first point I want to make on this is if you're trying to help young people get ahead then you can change how other people are taxed so that they are taxed more, but you actually need to give that money back to young people. That should be a principle here, and I think this is one of the most significant principles the government has ignored in this. They have made these tax changes neutral over the forward estimates, over the next four years, but they have not told the country where they are trying to take the tax system. They are holding the $77 billion worth of increased tax receipts that this package puts forward in their pocket, and I think they're hoping to give them back at an election. I don't think that's a good idea for reform and I don't think that's a good idea for people's trust in the system. I think that is a purely political decision rather than a decision to try to drive good reform.

If you look at Hawke-Keating or if you look at Howard and Costello and how they changed and drove tax reform, they made it revenue neutral. That was the way that they got the community on board. Right now, people in my community are going: 'I don't understand how this benefits me. I am a young person. I'm trying to save. I'm being told I'm going to get a $250 tax benefit at some point, but the government is taking a bunch more money.' People are genuinely concerned that this government has raised spending in a way that they—I certainly believe it's not sustainable. They have raised spending at a level that is certainly out of step with previous spending and previous governments, so people have a genuine concern that the increase in taxes raised by the government is not going to go back into income taxes. They're not cuts. They're not going to go back into the pockets of younger people. They may go back into more spending. I think that is a bad outcome for people and I think that reduces trust. So that is my first concern with what the government has put forward.

The second concern is about prosperity. The government has said and has recognised, and I think is genuinely engaging with, small and medium businesses and the startup sector about how these tax changes work for these businesses, because it is important that we get this right. If we don't build businesses, if we don't reward risk and if we become too much out of step with the rest of the world in terms of how we tax capital, then we have the danger that people leave. People that we want to build the businesses of the future won't stay in this country. There may not be a lot of sympathy for people who are really successful in terms of building businesses, but I think there is a lot of sympathy for anyone who has started and tried to drive a business. It is bloody hard. It is extremely difficult. You often don't pay yourself, you often put your own money in and you often are not sure if you're ever going to get it out. It can destroy your confidence if it doesn't work. You give up years of good earning as well to do that. We do need to make sure that risk is rewarded. The government, I think, is sincere. They are trying to consult business, staff and the small-business community. It's not good enough to try and pass a bill on that without actually getting those changes right as well. Again, I take the government on their word on this, but, at the same time, I just think they should not be trying to pass this bill or put through this bill without actually deciding what is actually going to be done for those types of businesses. It's not just start-ups; it is all types of small and medium businesses. If you're a service business, if you're a knowledge business or if you're a brand business, you often have very little capital that you invest in the start. Therefore, the new way that the government has changed the tax system in is really going to penalise you compared to compared to other things.

The second question is about international comparison. My concern is that there's an intellectual's elegance where the government has put this bill, but the truth is that there's no other economy in the world that currently manages indexation in terms of capital except Israel, but their top marginal rate is 30 per cent, so this is quite different to Australia. That international competitiveness is important. It is not potentially unresolvable with the government's indexation system, but we need to take a breath on this because it really matters. The other issues are in relation to ones like taxation of nominal gains. The government's current bill puts forward that you pay tax on real gains, but you only get tax relief on nominal gains. This is a real asymmetry in what the government has put forward.

Finally, there's an issue that, if you put your money into risk taking and you lose all your money, you don't get income tax relief; you only get capital tax relief. Again, there is a risk that goes with putting capital in that is different to earning a wage. You can't, at the end of one year of wages, get it all taken away again. I think we've got to get this balance right. I want to align the tax system better to reward young people trying to get ahead, people who earn their income via wages, but I am not yet convinced that where the government has gone is right. Certainly, I think that the government needs to look at the income smoothing that the original Keating model included. That was really important, and, even if you brought that in, you could actually, potentially, take out the 30 per cent minimum tax rate, which the government has put in and which is very badly understood because it's meant to be on real rates but nobody really understands that. Those are some of the areas that we can work on.

Those are some of the issues that I have with the tax bill right now, and I believe that you can resolve these issues. It may need a different model, it may need some different changes, but it is possible to make this work. There are issues with the negative gearing grandfathering. It is possible to make this stuff better and deal with those issues and make sure we get the right balance between fairness and prosperity, but we are not going to do that if you rush this bill through the House and Senate without inquiry in other areas.

Finally, my plea to the government on this is really to take a breath. Reform really matters. The government has shown the courage to put this on the table; that is the right decision. The rhetoric that no change is needed is wrong. We do need change in the system, we do need to get this right, and we do need a tax system that allows people, regardless of who their parents are, to be able to build wealth and prosperity, frankly, just to be able to build financial security for themselves and their kids. The way to do that is not to push through a tax bill that is not well understood in the community where issues are still being played out in the media as people try and get their heads around it. I spent the last four years working on tax; I'm still trying to get my head around this because it is complicated and it is important.

Government, please slow it down. The community doesn't understand it. It is too important for the economy to get it wrong. We do not want to see tax reform as we have seen in the past decades which gets in and goes out again. That is wrong for the country, that is wrong for where we need to go—particularly on capital because we need stable treatment of capital over time so that people have confidence. We need to get this right because, if we don't get this reform right, then we will see issues in future reforms as well. It will be harder to do this in the future. The government needs to wear the pain and the discomfort of doing something that people don't understand, get it right, do it right, and make sure you commit to giving the money back as reductions through tax cuts over time. That will make this reform stick, and it will better for the fairness and prosperity we need in this country in the long term.

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