I want to put my objections to the process on the record at the start. I understand the pressure the government has to pass these reforms this year, but, yesterday, we were asked to debate and pass a bill in the same day that it was introduced. The government has given us another 24 hours, but this is a small concession. This is treating the House and those people who sent us here with contempt, and the government is making it a habit. I'd now like to turn to the substance of the bill.

Rebalancing our tax system was an overdue debate left in the too-hard basket by generations of Labor and coalition governments. I give the government credit for taking it on. It's hard and it takes guts. The government has acted to try and increase homeownership, and I support that, but, looking at the packages before this parliament, I have two significant concerns. First, the government is not lowering income tax rates. That has, honestly, been the entire point of the work that I've been doing on personal income tax. Problems with trusts and CGT discounts would be significantly reduced if the top marginal tax rate was lower. Whether the government is saving this for an election or is wary of inflation, the $77 billion left unallocated in this year's budget because of these tax changes should have been committed in legislation to lowering marginal tax rates, even if they came in after a number of years. Secondly, the package the government has put forward in previous bills and in this bill fail on innovation and business investment, particularly because of CGT. They are delivering the opposite. I hear from people in my electorate about investments falling apart and entrepreneurs leaving the country because of the CGT changes. And while the IBCC that is included in this bill makes it better, this is not a fix. The government must do better.

Let me take these bills in reverse order. Tax reform No. 4 will introduce an innovative business CGT concession allowing qualifying companies to retain a 50 per cent discount. It will, secondly, reform the R&D tax incentive in line with the Denholm review and, thirdly, enhance venture capital investment vehicles. Fourthly, it will make FBT less generous for electric vehicles. I support the venture capital changes, and I have been pushing them. I support making FBT less generous for electric vehicles, and I think the government could potentially go further on this because of the great uptake in electric vehicles driven by the Iran war. But unfortunately the things that particularly are there to drive investment are overshadowed by the CGT changes. I want to put on the record that I remain deeply concerned by the government's indexation approach to the CGT discount when it is applied to businesses and shares. Its proposed fix for innovative businesses, the IBCC, is I think better than nothing but far short of what it needs to be.

I am on the record as someone who supports changing the CGT concessions. I am on the record so visibly. If it is driving reductions in marginal tax rates, that is the point. I think this is important, and I think these messages need to be sent, because we tax people the most heavily when they are least able to pay. That is indicated by two types of household, one over the age of 65 and one of working age. The working-age household pays, on average, twice the tax when their two householders are earning 100 grand compared with the retired household. That makes no sense, given that the working-age household probably has HECS debts, probably doesn't own their own home or has a big mortgage, and is maybe paying childcare costs.

We need to rebalance the system, because young people are being left behind. We have seen in the decade up until 2016 that the wealth of older households grew by around 50 per cent and the wealth of younger households flatlined. That is a problem, and it's a structural problem. And we have a structural problem with an ageing population. We used to have, in the 1980s, around six people of working age for every person over 65; now it's down to four, and in the future it's going to be down to under three. These are the reasons we do need to rebalance the system.

But I want to come back to the fact that I think changing the CGT model through indexation is wrong, because it is focused on fairness, which I support, but it is not doing what it needs to do on prosperity, and I think it is genuinely hampering the prosperity that we need to grow in this country. The Treasurer has acknowledged the indexation limitations for high-growth, low-capital companies, both in his budget papers and in his second reading speech on tax reform No. 1. And I think it is relevant that only one other major economy, and that is Israel, uses this methodology. But it has a top marginal tax rate on capital of around 30 per cent, not around 47 per cent. I know the government is trying to fix this, and I know the government has done genuine consultation on the IBCC and has responded to feedback on this.

But let's be honest: the IBCC doesn't fix all the problems here. Even in its current form, the IBCC proposal is complex. It is still administratively onerous. It doesn't work for genesis kinds of innovations, such as biotech. With those time limits it may not be appropriate. It doesn't work for publicly listed companies that are very innovative or taking high risks, such as minerals exploration and, again, some biotech. I think those reasons alone say that the IBCC itself should be better. But the problem is that even if we fix those challenges with the IBCC on those specifics, the IBCC and the indexation model are still not right for businesses and for shares. For one, they are complex, and that is an issue when it comes to tax. Adam Smith said simplicity should be part of the ambition for any tax system, and he, hundreds of years ago, was absolutely right. It is unfair. You don't have to be innovative to take enormous risk to start and grow a business. Many businesses in our economy are low capital and so are particularly disadvantaged by indexation but would not fall under this innovative sort of definition. It's just not fair. We do not want to penalise people who are taking risks who don't fit a government definition of innovation. We need to recognise that there is enormous uncertainty in starting and growing a business. That is why it deserves a discount.

Finally, this is internationally uncompetitive. We have businesses in this country that could be subjected to tax rates on CGT well into the 40s, compared to other countries. It's uncompetitive. We don't have to have the lowest CGT rates in the world, but we do have to be in the zone of competition or we will lose some of our best and brightest overseas. I think the government's current proposal could do that.

I am going to put forward a different proposal because I do believe there is a chance for the government to make substantial changes here that could make a difference. What I've been trying to do is ask, 'What could the government do, given the legislation that has passed, given the legislation that's in front of the parliament at the moment, to try and fix this?' I'm arguing that the government should, for businesses and shares, go back to a flat discount, and I'm arguing that we should use the 'active asset' definition—which is currently well established and well understood—from various CGT concessions, with some small modifications, and make that discount 40 per cent instead of 50 per cent. That would raise about the same amount of revenue, according to the PBO analysis that I have done, but it would be substantially superior.

These are the arguments why. Firstly, it would ensure that any company, regardless of its innovation potential, would get a guaranteed flat 40 per cent discount instead of indexation, and it would keep our top capital gains tax rate at around 28 per cent, which is competitive internationally. It's not the lowest, but nor is it the highest. It is in the zone of play. It would allow the government to keep indexation on housing, which I think is appropriate. I accept that there are some very good reasons there. The businesspeople I talk to have a wide variety of views in terms of how we should tax capital. But where I do think many of them are united is in saying that taxing at 40 per cent across the board on active assets, which would also benefit risk-taking in shares, is a better outcome than trying to do the 50 per cent only through the IBCC and have everybody else subject to indexation. I think the government really should look at this.

Finally, this bill reforms the R&D tax incentive based on the Ambitious Australia report. Again, I'd say that the intention is worthy. I recognise that the government has done some very good things here, including the higher offset rates for core R&D. But I'll be honest: I'm concerned on two fronts. One is about removing support of R&D. We know that they've expanded the definition of core R&D through the offsets, but we don't think they will be completely offset. The second thing is the time limit in relation to these R&D tax incentives. I understand where the government's coming from here, but I still think, particularly for biotech or deep tech, that 15 years isn't enough. I met Dr Julian Freitag today, whose company, Magellan Stem Cells, is 17 years old and in Phase III trials. It's exactly that sort of company that would not be able to get this important R&D tax credit under the current changes. So I'm urging the government to reconsider this.

I'll turn to Treasury Laws Amendment (Tax Reform No.3) Bill 2026. This bill delivers the budget commitment to a minimum 30 per cent tax rate on trust distributions. It includes rollover relief for those structuring out of a discretionary trust and a new electable regime, the excluded election trust. It also clarifies how CGT applies to trusts and defines 'new residential dwelling' for the CGT and negative gearing changes already passed. It's been a really hard time for small businesses and restructuring is one more thing to deal with. I think the timing of trying to get businesses to restructure is wrong. Certainly, while I support principles of managing trusts in a more effective way, I've never thought we should actually deal with the trusts directly because of the complexity of restructuring. Regardless of this, I do believe we should be working towards a tax system on the principle where, if money is earned, the tax rate that is applied is pretty consistent, regardless of the structure that you individually are able to use.

I want to admit that there are very many genuine reasons for trusts, including managing succession in family businesses—and my own family has those trusts in place—but it is very clear also that trusts have really ballooned in recent times for reasons outside of business succession and through income splitting in different ways. I don't blame anyone using these structures. I keep on coming back to the fact that we need to cut the top marginal tax rates, when the incentives to use these sorts of structures would be significantly reduced, which would be beneficial to the overall economy. I recognise that many people in my electorate use these structures for things that really matter to them, like helping their young people through uni or topping up an older parent's income. I take the point that these are really positive things, but I recognise that they aren't open to everyone, and therefore I think it is appropriate to consider these restructures, though I have to say I'm really concerned by aspects around stamp duty, because the states haven't guaranteed that they're going to waive stamp duty, and I think that is a really significant challenge with this piece of legislation.

I'm going to finish off with some broad observations on tax reform. Tax reform is essential in this economy—and, I think, with low productivity and real challenges on housing and opportunities for young people to get ahead, it's critical. But we need to be clear on the why and clear on the principles on which you judge a reform. We need all the taxes on the table and we need a transparent process that allows us to properly manage the trade-offs and build community support. And I do not believe that the government has delivered any of these effectively in this bill. In the green paper I first did on tax, I outlined six objectives for tax reform that I think are still relevant: lower income taxes, rebalance the tax settings in favour of homeownership, which I agree the government has done, boost productivity and growth, stabilise our revenue base so that it can endure changes to demographics and consumption patterns, support the energy transition through better tax settings, and implement institutional reform. There are also six principles which build on Adam Smith's principles of efficiency, fairness, simplicity and adequacy which are important to the tax system. One, tax reform should encourage economic productivity and growth. Two, it should raise revenue with the least cost to society by minimising distortions in the way we work, consume, save and invest. Three, it should encourage behaviours that benefit individuals, society and the environment. Four, it should treat people and organisations with the same capacity to pay in the same way and raise more tax from those with greater capacity to pay. Five, it should be easy to understand and simple and cost-effective to comply with. Six, it should provide a stable tax base over time given changes in the economy and society.

There are always trade-offs against these objectives and against these principles, but I still think they stand the test of time. And I think that this is where we need to go from here, because the tax reform that is in front of the parliament at the moment should be better, but it also should not be the last word. We have minerals that are undertaxed. We have stamp duty that taxes mobility. We have no credible way of pricing emissions. We have communities worried about jobs and AI, yet we tax people who employ people. These things don't make sense. We need to drive better outcomes across our society. The tax system is a critical part of this, and that is why we need broader tax reform but with principles and with purpose that are clearer than where we are today.