Allegra Spender (Wentworth, Independent) Share this | Link to 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.

Colin Boyce (Flynn, Liberal National Party) Share this | Link to this | Hansard source

Is the motion seconded?

Kate Chaney (Curtin, Independent) Share this | Link to this | Hansard source

I second the motion. I agree with the stated intent of the tax reform bills, and that is to level the playing field on property. I think there is appetite for that and I commend the government for finally tackling the tough issues after decades of inaction from both sides. I've advocated for tax reform since I first started in this place, for the sake of intergenerational fairness and to shift more of the tax burden from active to passive income, and this is a start, but there's more to do. It is so important that we get this right.

These bills, the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026, will fundamentally change investment behaviour across our economy. They will affect millions of Australians and have significant interactional effects with superannuation, housing supply and business investment, so the stakes are really high if we get this wrong. The potential unintended consequences are significant for productivity, our other major challenge, and also for fairness.

I recognise there will always be winners and losers in tax reform. We have to accept that, but we need to understand these trade-offs, and the community needs to understand why these are the right trade-offs to make. I've had a lot of correspondence from constituents who are concerned about these changes. Some of those concerns are based on misunderstanding, but some raise legitimate concerns, and both types need to be addressed so that we can maintain trust in undertaking tax reform, so a 'crash or crash through' approach shouldn't be the right approach when we're making big changes like this. It's really important that the public understand the why and the how, and we are not there yet. If this isn't done well and with public understanding, it will make it much harder to do other reform—the reform that we need for intergenerational equity and to make sure we have a tax system that's fit for the demographic changes that we're seeing.

We have committee processes for a reason. Committees are there to receive public submissions, to hold expert hearings and to apply scrutiny to unintended consequences. Committee processes can also surface new information that the government doesn't have, and governments can't be expected to know everything and get everything right immediately without that broad consultation. A committee process will build legitimacy and trust. It will increase the likelihood that the drafting actually matches the policy intent, and it will provide an opportunity for government to clearly justify and explain the choices that are being made. It will make the legislation better. Rushing this through without adequate scrutiny makes it more likely that the legislation will require amendment, so it's actually lower cost to have proper scrutiny now too.

These bills are within the Economics Committee remit. The Economics Committee exists precisely to scrutinise legislation and policy with broad economic implications, and these bills have implications for a broad range of economic issues, including housing affordability and supply, investment incentives and capital allocation, revenue and fiscal settings, distributional outcomes across income groups, and productivity.

There are a range of unanswered questions that a committee inquiry could help to answer. On capital gains tax reform, it could look at what the pros and cons of the CGT changes extending to all asset classes are, rather than limiting it to housing, which is where the market distortion was identified. It could look at how the government might protect founders, employees and investors in startups, given that startups typically have a low cost base, meaning almost all future gains will be taxed as real gains, and given how vital they are to meeting our productivity challenge. It could look at what the impact would be on productivity and fairness if the small business CGT exemption threshold were raised. It could look at how we could allow founders to spread capital gains over multiple years and look at whether that's a workable solution and whether it has been modelled. It could look at how the changes would affect ordinary Australians investing in high-growth shares and ETFs as a means of building wealth and what the implications of that are. On negative gearing, the committee could look at what evidence there is that limiting negative gearing to new homes will meaningfully increase housing supply, rather than simply shifting investment patterns. It could also look at how the grandfathering of existing arrangements might impact the market.

Additional time will allow more consultation. The government has said that it is undertaking consultation on the CGT changes and that that will happen in due course. But if this goes to a committee and there is additional time, then a complete, considered legislative package could come back to the House, not bills that will require immediate amendment.

We really need to get this right. We have committee processes for a reason, and the government should use the committee processes that we have to ensure that we have the best version possible of this aspect of tax reform and that the public understands the implications and the trade-offs that are being made. So I commend this motion to the House.

Dan Tehan (Wannon, Liberal Party, Shadow Minister for Energy and Emissions Reduction) Share this | Link to this | Hansard source

We've said we will work with all members of this House to have these toxic taxes fully examined and to absolutely ensure that we're doing everything we can to make sure that the Australian people know what the broken promises will mean for them, and the best way in which we can do that, and the first step in doing that, is to make sure that they're fully examined.

I would say to the government: What have you got to hide? Why don't you want these toxic taxes fully examined? Why don't you want the entrails sorted through so that we know and understand who you're hitting? Not only do we need to know all the detail; we need to make sure the government understands the detail, because, as we've seen in question time time and time again, the Prime Minister doesn't have a clue about his own budget.

What we would like to know is this. The Prime Minister has said publicly, and I hope the Prime Minister was being honest with the Australian people, to use his own words, because he's said it is time to be honest, that these are just simple changes taking us back to the pre-Howard changes. Does that mean you can average over five years or not? Does that mean you can offset a loss on one asset against the gain on another asset? We've put that to the Prime Minister and, guess what, the Prime Minister hasn't got a clue about his own budget.

Not only that, now we're starting to see more and more people speaking out against these budgets. We read in the Sydney Morning Herald today—and I think the chair of the Labor economics caucus committee might be in the House with us today—that even they don't like it. They've got questions of it. The Prime Minister's innovation award winner for 2024 has come out and said he doesn't like this budget. Not only that, we've also heard from the Premier of Western Australia—Labor royalty. The Labor royalty has come out and said that they don't like this budget. Not only that, Chris Minns from New South Wales has come out and said that he doesn't like it.

So you've got the Labor economics caucus committee, you've got Chris Minns and you've got the Premier of Western Australia, Roger Cook, all saying this is a dog's breakfast. Basically, every Tom, Dick, Harry—oh, and Andrew, the member for Parramatta, of course; I'd nearly forgotten him. He's come out and said that he's got concerns about it. I forgot that there's the member for Bennelong as well. He's popped up and said, 'I've got questions and queries about this.'

The list goes on and on. The Housing Industry Association have come out and said they don't like it. The Business Council of Australia are out saying they don't like it. The Australian Chamber of Commerce and Industry are out saying they don't like it. COSBOA are out saying they don't like it. As a matter of fact, I think there are only two people in this country who do like this budget: the Prime Minister and the Treasurer. I don't think there are too many other people lining up behind it.

Of course, there was all this spin at the start, and some people got sucked in with that spin. I would say to a lot of people: always look at the detail, because this government's very good at the spin. Once you get to the detail, you start to see, in particular, the unintended consequences which come from broken promises and from complete and utter spin. This is why this budget needs to be examined, and it's why these bills need to be examined. We've said we will do anything we can to get this parliament to examine these bills and then to throw them out.

I say to the Prime Minister you have a chance. The Prime Minister has a chance. He can show some courage. He can say, 'Yes, I told the Australian people one thing before an election and I did completely the opposite after the election.' The Prime Minister could have the courage to front up and say that is what he did. In doing that, he has not only embarrassed himself; he has embarrassed every single member of the Labor Party caucus. All of them have been embarrassed—

Sam Rae (Hawke, Australian Labor Party, Minister for Aged Care and Seniors) Share this | Link to this | Hansard source

I'm not embarrassed.

Dan Tehan (Wannon, Liberal Party, Shadow Minister for Energy and Emissions Reduction) Share this | Link to this | Hansard source

because they know—well, I hope they know—that integrity in this place still counts for something. The minister's interjecting that he doesn't seem to think that integrity does matter in this place. That's a matter for him. But, I've got to say, I think integrity is important, and I say to the Labor Party caucus it should be important to you. So why don't you say to the Prime Minister: 'Prime Minister, you said one thing before an election. You've done completely the opposite after the election. It's time to at least front up and be honest about that. Be honest for once. Just say: "Yes, I misled the Australian people, and because I did that, I want these Treasury bills fully examined. I want proper public scrutiny of them. I want to make sure that everyone knows the details of these bills."'

If the Australian public don't know and don't understand the details, they won't know how it's going to hit them. We know it's going to hit small business. It's going to hit farmers. It's going to hit the tech sector. It's going to hit the mining exploration sector; we've had Roger Cook, the Western Australian Premier, come out saying this. It's going to hurt people when it comes to what they're doing on income tax; the Premier of New South Wales has said we've got to address bracket creep, which is what we will do.

The only thing we get when we ask the government questions about their budget is the Prime Minister saying: 'Oh, I'm not quite sure. I don't really know. You can't put you can't put those questions to me, because I'm not across the detail.' Well, we do need to know the detail. That's why it's important that this gets referred to the economics committee. Maybe, in having it referred to the economics committee, it will give the government time to reflect. I think they do need to reflect on that side of the House.

You even have the Prime Minister's award winner for innovation in 2024 saying that this needs changing. You have the Premier of WA, the Premier of New South Wales, the Labor economics committee caucus, the Business Council of Australia, the Australian Chamber of Commerce and Industry, and COSBOA. You've even now got the National Farmers' Federation beginning to realise that there are serious consequences for farmers, especially when it's about them handing on their farms to the next generation. Remember, this was all meant to be about generational fairness. I tell you, this is going to kill family farming, and maybe that's what those opposite would like to see, like they would see the death of small and family businesses in this country.

We've said we'll work with this parliament to examine these toxic taxes. We've said we will work with this parliament to make sure that these toxic taxes do not go ahead. That's why we're happy to stand here and support this motion which will make sure that these bills go to the economics committee in the House, and we want to make sure there is proper interrogation also in the Senate. This is a toxic budget built on toxic broken promises, and it needs to be fully examined and thrown out of this parliament.

Zali Steggall (Warringah, Independent) Share this | Link to this | Hansard source

I support this bill being referred to the House Standing Committee on Economics, because it makes significant changes to Australia's tax settings and those changes deserve proper scrutiny. I thank the member for Wentworth for bringing this forward in the House today. I want to be very clear: I support the objective of improving housing affordability and making the tax system fairer. There is no question that negative gearing and capital gains tax settings have contributed to the distortion in the housing market, growing generational inequity and the difficulty in becoming a first home owner.

I also want to put on the record that I do commend the Treasurer and the government for having the courage to try and tackle this. It is hard. When I look at the grandstanding hypocrisy of some of the contributions in this place, there is no doubt that it is hard to tackle, so I commend them for having the courage to look at it when it comes to the housing aspect. But, because it is so hard, it is incredibly important to have that social licence and try and bring in the vast majority of Australians to make sure there isn't ground for festering misinformation and to make sure that the Australian people understand the case and the true consequences and possible unintended consequences of reform and this legislation.

What we know is that this bill goes far further than housing. It has implications for small businesses, family businesses, startups, trusts, shares and young Australians trying to build financial security outside the property market. The parliament should not be asked to rush through complex tax reform without a clear understanding of who is affected, what the unintended consequences may be and whether sensible carve-outs or transitional arrangements are needed. I understand that there are further negotiations and details that are being worked out, but, in that situation, it's simply impossible to genuinely assess the full measure without having all of that detail available. Good reform should be targeted, evidence based and durable, and that requires committee scrutiny.

In Warringah, it's not an abstract policy debate. Constituents have raised serious concerns about how these changes may affect their ability to build a financial buffer. One constituent—Nicola, a 36-year-old from Warringah—told me that she doesn't usually follow politics. She's not overly engaged, but, for this, her and her peers are very much engaged. She told me that she and her partner both work in demanding jobs and they are above average in income. They're in engineering and law. They have good incomes. And yet, as millennials, they're up early and home late. They've borrowed responsibly, yet they still feel like there is very little left over. They are barely getting ahead.

Nicola and many of her friends have invested the little bit of cash flow left over in shares and ETFs. It's not about getting rich. It's not about massive incomes on the side next to their work income. It's simply about trying to build some security beyond wages. It's about saving for a home, creating a buffer against rising costs or slowly building the capital needed to start a business. I've heard from many young Australians who have already been priced out of property investment. If we close off the share investment pathway, a beneficial way to build a buffer, then we risk pulling up one of the few remaining ladders for wealth creation or buffer creation for them.

Small business owners in Warringah have also raised concerns. Many are not large corporations with deep balance sheets. They are in fact local employers, family businesses and people who have taken risks, reinvested profits and built something over many years. The government has framed this bill as a housing affordability measure. That may be a fair description for parts of it, but it does not answer the broader concerns about shares, trusts, business assets and small business succession. If the policy goal is to reduce speculative investment in residential property, then the parliament should examine whether the bill is properly targeted to that goal.

We need to know whether the measures risk discouraging entrepreneurship, investment in productive businesses and modest long-term saving by younger Australians. We also need to understand the impact on people who have already made financial decisions under existing rules. Tax reform should not blindside people who have acted responsibly and planned in good faith. The Treasurer has said that one in 10 people under 35 hold shares, but that still amounts to 660,000 people. And then there are still a lot of other people who are looking at how they are going to grow a buffer beyond their income and earnings. So the concern is not that the capital gains tax should never change. The concern is that change should be carefully designed and we have to absolutely know what the unintended consequences may be.

Referral to the House Standing Committee on Economics would allow the parliament to test the evidence, hear from experts and stakeholders and improve the bill before it is passed. A committee inquiry should examine whether the bill should distinguish more clearly between residential property investment and other forms of investment, including shares, small-business assets and trusts. It should consider whether concessions, exemptions or grandfathering are appropriate for young investors, small investors or small businesses. It should examine whether there should be thresholds, caps or transition rules to protect ordinary Australians who are not the intended target of the reform. It should also seek the modelling assumptions and policy rationale behind the government's approach so the parliament can assess whether the measures will actively improve productivity and housing affordability.

There is so much misinformation and scaremongering out there, and that is one of the areas that the Treasurer has raised with me—the frustration around how much misinformation is festering. But the only way you address misinformation is by having a clear process of inquiry. It is not by shutting down debate and saying, 'There's nothing to see here; let's move on.' I would urge the government to consider that. I think the Australian people are reasonable. They want a tax system that is fair. Young Australians want a housing system that is fair to allow them to get in. Australians want a fairer tax system. They want this to be fair. I absolutely support that ambition and, as I said at the beginning, I commend the government for having the courage to tackle this, but we have to do it well for it to stick. We have to do it well for it to grow consensus among the Australian people.

We should not pass rushed reform that may create new unfairness while trying to fix an old one. Young people need pathways to build wealth and a buffer. Small businesses need confidence to invest and grow. Tax reform should strengthen those pathways, not diminish aspiration. The bill should be referred to the House Standing Committee on Economics so it can get the detail right, protect against unintended consequences and deliver reform that is fair, targeted and evidence based.

Sam Rae (Hawke, Australian Labor Party, Minister for Aged Care and Seniors) Share this | Link to this | Hansard source

I move:

That the debate be adjourned.

Colin Boyce (Flynn, Liberal National Party) Share this | Link to this | Hansard source

The question is that the debate be adjourned and the resumption of the debate be made an order of the day for the next sitting.