Slade Brockman (WA, Deputy-President) | Link to this | Hansard source

The committee is considering the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026 and amendments 3 and 4 on sheet 3882 moved by Senator Chandler. The question is that schedules 1 and 2 stand as printed.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I rise to make a few remarks here. I also would like to table a supplementary explanatory memorandum relating to the government amendments to be moved to the Treasury Laws Amendment Bill (Tax Reform No. 1) Bill 2026. I would like to outline what those amendments are going to be because it relates directly to some of the discussions we've been having on amendment 3882.

The government amendments and the explanatory memorandum that I just tabled implements the government changes to the bill announced on 18 June 2026. As we announced on that date, the government is proposing target amendments to the bill to provide certainty on implementation detail consistent with the original intent of the policies. The amendments extend the eligibility of the 50 per cent active asset reduction to more businesses by increasing the turnover threshold from $2 million to $10 million. They also ensure deductible gift and donations reduce capital gains that are subject to the minimum tax to maintain tax incentives in relation to charitable giving, provide the list of income support payments that qualify for an exemption for the minimum tax on capital gains, embed the calculation method for the working Australian tax offset in legislation and remove ministerial powers no longer needed to give effect to the government's policy intent.

The increase in the small-business concession eligibility threshold brings eligibility for this concession into line with the turnover threshold for the instant asset write-off. This will mean that all 2.7 million active small businesses and 98 per cent of active businesses will be eligible for a 50 per cent CGT discount on active business assets on top of the discount for inflation where eligible once these reforms are in place. The payments that exempt recipients from the minimum tax on capital gains include age pension, Austudy, carer payment, disability payment, JobSeeker parenting payment, youth allowance, family tax benefit, parental leave pay and veteran payment.

The government also intends to remove ministerial discretion in relation to the following aspects of the bill, with legislation to be introduced later this year following consultation around the definition of new builds that are eligible to choose a 50 per cent discount on gains accrued from 1 July 2027 and eligible to access negative gearing for properties purchased after 12 May 2026, consistent with the details outlined in the bill, and also the definition of types of housing investment exempt from the limits on negative gearing, including affordable housing. The government will amend these two ministerial powers to limit the scope of both definitions in line with their intended use as an interim step ahead of removing these powers and moving the full definitions into primary law in subsequent legislation. These amendments reflect the substantial consultation undertaken since the budget, consistent with the government's commitment to engage with stakeholders on implementation. They provide more clarity and confidence to investors and more support for small business.

I note also that, in some of the amendments that have been circulated and will be moved through the course of the committee stage this morning and into the afternoon, there are some amendments that relate to some specific interactions of how the tax system operates and the reforms that are being put in place today.

I know there are discussions happening with interested parties on this across the parliament, but we have made clear from the get-go, from the evening the budget was announced, that we were aware that there would be tranches of legislation, as I said in response to Senator Chandler's amendment earlier, that would require us to work through some particular and specific interactions of tax law in subsequent legislation. We were aware of some of the issues that Senator Pocock is raising around grandfathering and shared ownership. We are working through them in the usual way, and we intend to address the arrangements for jointly owned assets in circumstances like inheritance or divorce in subsequent legislation.

In both answers that I and the Treasurer gave yesterday we took care around our response given. We are still considering the amendments that were being circulated in the Senate throughout the day but we have been clear on a number of occasions that the complex details that arise through these reforms remain to be worked through following consultation. The core arrangements in the bill are consistent with the existing arrangements in the tax system around the acquisition of assets, because wherever possible we have aligned the core legislation with the existing system. Now there are a number of complex considerations here, including ensuring the right treatment for new-build properties, ensuring consistency with existing CGT rollovers that apply to property transfers in these circumstances and ensuring that changes don't introduce unforeseen integrity risks.

As we've said all along, legislating significant reforms in tranches is the standard approach. Past reforms such as the GST and other major changes have similarly been implemented in tranches. I hope that just provides some additional information about how the government has been and will continue to work through the tax reform package as a whole, including dealing with some of those issues that are being raised in amendments that we were aware of, and we will bring back our response to that through subsequent pieces of legislation.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Just to move to some questions now, in particular in relation to schedules 1 and 2, because, as previously stated with this amendment, that is what we are seeking to have removed from the bill. Minister, how much in higher taxes are you imposing with your changes to capital gains tax alone contained in schedule 1?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

The capital gains tax and negative gearing components, I think we've been clear, have a positive impact of $3.6 billion over the forward estimates, and about 85 per cent of that revenue is from the changes to negative gearing. That's all published in the budget papers. I would say in relation to that that the working Australian tax offset, which is also included in this package, has a forward estimate impact of $6.4 billion. Essentially, what is being raised through those schedules is being more than offset and returned to 13.3 million taxpayers through the provision of the working Australian tax offset.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Just so I can be very clear, Minister, did you just say that, of the $3.6 billion in revenue that these changes bring in collectively, between capital gains tax changes and negative gearing changes, the negative gearing changes will bring in 85 per cent of that $3.6 billion?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

():  Yes, it's my understanding that that information has been provided in a question on notice. About 85 per cent of the revenue across the forward estimates is from the reforms to negative gearing.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Just to be very clear, then, because my initial question was in relation to the changes to capital gains tax, how much revenue will the changes to CGT bring in over the forwards?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I was just taking some advice, as you do. We haven't separated the components. The published figure is a combined impact of $3.6 billion, but we have provided that figure, as I understand it, the 85 per cent figure, through a question on notice response. I don't have any further information to provide on that.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Sorry, I'm not trying to be tricky here, but am I correct in saying that the remaining 15 per cent of the $3.6 billion revenue stream from these tax changes would be from the CGT changes?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Yes, I think that is over the forward estimate period.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

():  Right. Well, I'm glad that we finally do have a response to that question from the minister, given it was a question that we asked during Senate estimates. It was a question that we asked during the committee inquiry, and it was quite staggering that we went through that two-day inquiry and were unable to get a cost breakdown from Treasury in relation to the revenue that those changes would bring in. So, to be very clear, the $3.6 billion in the budget, 85 per cent of that is attributable to the negative gearing changes and 15 per cent of that is attributable to the capital gains tax changes? I just want to be very clear that that's what you're telling this chamber, Minister.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I don't think it's—I mean, I'm surprised. I think we've been clear. Certainly, I've spoken in interviews about how, across the forward estimates, negative gearing has a larger impact than capital gains tax. I don't think that's a secret. So, for the $3.6 billion, the interaction between the two of them—the capital gains tax and negative gearing—has a positive impact of $3.6 billion. Of that, the vast majority comes from the reforms to negative gearing, and, as I said, that's being more than offset and returned to taxpayers through the working Australian tax offset, which is $6.4 billion across the forward estimates.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Sure. But there is a difference between saying the majority of the revenue stream was attributable to the negative gearing changes and actually having some numbers to put behind that, Minister, so I do thank you for providing that information to the chamber today finally. Minister, we heard extensive evidence during the committee inquiry that estimated that the compliance costs or the regulatory burden to implement these changes and to ensure that businesses are able to comply with these changes would be upwards of $500 million per annum. I think it was CPA Australia that gave that estimate to the committee. How can we justify the $88 million per annum regulatory burden estimate that the Treasury has provided when witnesses to the committee were saying that it was going to cost, as I said, well north of half a billion dollars per annum?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I note Senator Chandler uses, I think, an estimate of compliance costs from CPA Australia. We can't and don't—obviously, we don't verify their numbers. They use their numbers and defend their numbers. The Treasury estimate is $88 million per year, and Treasury's estimates were calculated in the normal way and informed by their work with the Australian Taxation Office, who are the experts on these matters.

I would also say to Senator Chandler that the first regulatory reform bill to reduce regulatory burden in this second term of our government was opposed by the opposition. We've got another bill that's currently before the parliament where we seek to, again, reduce compliance burdens. Obviously—and, again, this goes to the issue of the tax reform package as a whole—there's been a lot of commentary and interest in certain elements of the tax reform packages. The tax reform package seeks to make a simpler and more sustainable tax system. The instant deduction, for example, will relieve. And I think people are pretty keen on being able to have an instant tax deduction of $1,000 without receipts. There's also the instant asset write-off, making that permanent, and modernising PAYG to help businesses. And then, of course, there are a whole range of other investments into small business. But you have to look at the tax reform package as a whole.

I understand that the politics of this debate mean that you will be picking certain numbers to support your arguments. But the Treasury estimate for the compliance costs is a much, much smaller number than that provided by CPA Australia. As I said, we don't verify or work through their numbers. They're matters for the CPA to defend.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Recognising what you've just said, that the CPA Australia numbers are a matter for them, it's still a pretty big difference. Has the Treasury done any analysis to determine whether or not the compliance cost number that they came up with, the $88 million, is an accurate breakdown given that we had evidence to the committee inquiry to suggest that that number might have undercooked it slightly?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Treasury doesn't usually adjust its numbers based on submissions to an inquiry. I mean, Treasury's estimate is based on the information they have. They work with the ATO, and it informs the advice they provide. But their advice to government, and publicly, is that the compliance cost estimate is $88 million per year.

We continue to—as I said, through every way possible—look at how we reduce compliance burdens on business and individuals. There are a number of elements in this budget that seek to do that, which I would hope the opposition are able to support, including the instant asset write-off and expanding dynamic monthly business tax instalments on an opt-in basis, if businesses would like to do that. We will continue to progress regulatory reform through the term of this government. But, in this budget alone, making the instant asset write-off permanent—there's modernising PAYG, and the instant tax deduction is making a simpler tax system. The Treasury's estimate on compliance costs remains at $88 million.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Minister, just going back a bit, in your initial response to my question about the revenue that would be brought in by the capital gains tax changes alone, you said that that information had been provided in response to a question on notice. Could you tell me to which Senate committee, which inquiry or, indeed, which estimates process that QON was provided, if that was the case.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I've just been advised that the question on notice was taken through the inquiry on the bill—that is, through the economics legislation inquiry into the bill—and the answer was provided to the committee on Monday.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

How much is collected by the minimum 30 per cent tax on taxpayers with less than $45,000 in taxable income?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I'm just seeing if we have that information available. I'm advised that we don't have that information available today to provide to you. It hasn't been assessed, essentially, in that way. I'll see if there's anything further I can provide you. But my advice is we don't have those numbers here.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Why? I note there's a bit of paper shuffling over there. This is entirely foreseeable and, I think, an element of this taxation package that's important to consider. Is there a reason why seemingly no-one in the department has broken down this particular element of the revenue stream?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Sorry, Senator Chandler. It's difficult to listen to your question and try to get advice on your question at the same time. I understand your question essentially related to why we don't have that number. It's not broken down in that way for reporting through the budget process at an aggregate level. That's not how Treasury provide those numbers. So I'm not in a position to give you a breakdown in the way that you're seeking to break that number down.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

During Senate estimates earlier this month, I asked the Treasury secretary whether Treasury had undertaken any specific assessment of how the government's capital gains tax and negative gearing changes would affect women. That question was taken on notice at the time. Minister, as the Minister for Finance and the Minister for Women, can you confirm that you did not ask Treasury to analyse the impact of these tax reforms on women before they were announced?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

As the Minister for Women, I get a range of information on the measures through the budget process, as you would understand. We publish the Women's Budget Statement, which actually does have, from my recollection—I don't have that book in front of me—a section that relates to tax reform and the impact on women. But, as the general gender analysis will show when we look at matters around tax—you can see it in the Tax Expenditure and Insights Statement, which now reports on gender as well and breaks it down—overwhelmingly, overall, more than a majority of tax concessions, when they apply, benefit men, because women tend to have fewer assets and less income. The way that the tax system works and that tax concession works is that, overall, men tend to do better out of tax concessions than women for those reasons—lower income and lower assets.

In terms of whether some gender analysis was done on the tax reform, I can confirm that there was, and, in general—not that we usually release specific or individual analysis, because they remain cabinet documents—the reforms put forward would improve gender equality by reducing the relative generosity of the current concessions which primarily benefit older and higher income taxpayers, and men are overrepresented at the higher income levels and report a larger share of net capital gains. Just going back to that—thank you to those that found the information for me—the Tax Expenditure and Insights Statement in 2022-23, by gender, reported 420,000 men and 410,000 women used the CGT discount. Men received 58 per cent of the benefit from the discount. By gender, it was equal on taxpayers who claimed rental reductions—1.2 million men and 1.2 million women—but men received 57 per cent of the benefit from those deductions. When we look at other elements of the package in relation to the working Australian tax offset and the instant deduction by gender—obviously, 13.3 million taxpayers will receive a tax cut of up to $250 in 2027-28 from the working Australian tax offset, including 6.3 million women, which constitutes 48 per cent of those who benefit, and 47 per cent of the WATO benefit is expected to go to women.

On the instant tax deduction, 3.3 million beneficiaries of that, or 54 per cent of that, for the 2026-27 income year, are expected to be women, with 52 per cent of the instant tax deduction benefit as expected to go to women. Although more women than men are expected to benefit—this goes back to the earlier point—the average benefit for men is higher than for women so that is men in receiving the order of $215 through the instant tax deduction and women around $200. That is driven, really, by the underlying distribution of taxable incomes. Men have higher average taxable incomes than women and are subject to higher marginal tax rates on average.

The Women's Budget Statement includes information on the gender impacts of various tax policies, including the combined impact of the government's tax cuts and tax deduction, and, for an average Australian female worker on $68,343, the combined benefit of those tax cuts and the instant tax deduction could be up to $2,494 per year from 2027-28, relative to 2023-24 tax settings. On average, an average Australian female worker earning that income, all things being equal, would benefit almost $2½ thousand per year compared to the 2023-24 tax settings. I'm not sure there's more I need to provide there, but, yes, we do consider these and assess them. In fact, the Tax Expenditures and Insights Statement—I thank the Treasury and the Treasurer for this—now reports against those by gender.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

There were a few numbers in that document that you were reading from. Is there any possibility you could table that document for the Senate?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I'm happy to provide that outside of this; I don't know how we do it. It's like a question on notice. I'm happy to provide those numbers to you, Senator Chandler.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

There was a lot of content in that answer that you just provided, but I'll just paraphrase that first part. Am I correct in saying that you have undertaken specific assessment of how the government's CGT changes and negative gearing changes would affect women, but you aren't willing to provide the information breakdown of what that impact looks like to the Senate?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I did, in a sense. I did, in relation to reporting against the current arrangements for CGT and rental deductions, and in future Tax Expenditures and Insights Statements, because of the changes we've made to that report, which do report on and provide some gender analysis. Once these reforms are put in place, which is from 1 July 2027, that report will continue to provide that information. If there's anything more that I can provide you with—as you know, we do gender-responsive budgeting. We do consider measures coming through the ERC process through gender analysis or gender impact assessment, depending on the size of the measures and the magnitude of it. We did so for these reforms.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Can you provide that modelling to the Senate?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

No. They're cabinet documents. To be clear, I did say in my earlier answer that, if you look at Schedule 1, which is CGT—and I specifically read out the relevant paragraph—the proposal would improve gender equality by reducing the relative generosity of the current CGT discount, which primarily benefits older and higher-income taxpayers. We know that men are overrepresented at higher income levels and report a larger share of net capital gains.

I'm not tabling the document—it's a cabinet document; it's a budget document—but that's essentially summarising the analysis. We did it for the other schedules as well. On negative gearing, the proposal would support gender equality by reducing a concession that currently provides a greater benefit to higher-income taxpayers, of which the majority are likely to be men. On our support for the first home buyers component, if we're reducing investor demand for particular types of housing, that could support more women to enter the housing market. When we look at the Working Australians Tax Offset, that's fairly evenly spread across genders; it has a neutral impact there. On the instant tax deduction, women are expected to receive slightly more than half of the total tax relief provided by that measure.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

We heard evidence—I believe it might have been at Senate estimates rather than the inquiry into these bills—that Treasury had not undertaken modelling on the productivity impacts of these changes. Is that still the case? If it is still the case, why has the government not fully modelled the productivity impacts of these changes?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I refer back to the evidence that was given at estimates on this. The evidence that I recall from sitting there listening to the Treasury advice is that the reforms in the budget, taken as a whole, support their confidence about their productivity forecasts, which are outlined in the budget. If I recall Macroeconomic Group's appearance—it was a long appearance—I think that essentially encapsulated all of the evidence provided that day.

We have this every estimates hearing about modelling and what constitutes modelling. I think the way the officials dealt with that when they considered—because macro has a certain way of viewing modelling, they don't do, necessarily, individual specific reforms; what leads them to support the productivity numbers in the budget is the amalgamation of all of the decisions taken in the budget. I'm sure someone will correct me if I'm wrong on that, but no-one's looking particularly worried in the box.

But I think the other argument made, or the evidence given, was that by removing some of the distortions that exist now in the tax system—and we've seen that—and it's very clear when you look at the tables in budget statement 4 of BP 1, which, again, I don't have with me, and look at the evidence or what those tables show, there has been a significant attraction in investing in established properties away from other types of asset classes. We are essentially rebalancing that and making the system neutral to that and changing negative gearing so that things can't be separated, really. By making those decisions we've made on negative gearing, we are supporting a system that allows investors to make decisions in a more efficient way by making decisions based on real returns. 'What is the best and most productive use of my investment dollars into what asset class?' rather than 'Established property delivers the best in terms of tax concessions and returns.' That's what we are seeking to do here.

Some information just passed to me is that Treasury Deputy Secretary, Macroeconomic Group, Dr Grant, stated in estimates, 'The proposed reforms provide us with greater confidence in achieving the medium term,' sorry, it was the productivity assumption not forecast, 'productivity assumption of 1.2 per cent per year, which is outlined in the budget papers.' In testimony to the Senate inquiry, former Productivity Commission Chair Michael Brennan, and independent economist, Saul Eslake discussed possible productivity benefits of the reforms, and their views are consistent with the department's assessment. Mr Eslake said, 'The reforms are expected to improve economic efficiency and housing affordability by reducing tax distortions that favour property speculation,' and Mr Brennan noted, 'The productivity effects come from improving the allocation of capital, but the overall change to Australia's investment environment is relatively modest.'

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Yes. I do recall that evidence at the Senate inquiry, Minister, but I also recall that those witnesses said during the inquiry that they hadn't undertaken specific modelling to bear out that assessment and that that was a general assumption that they were making without being able to put numbers behind it.

Can we go back to the Treasury modelling, though, and the productivity impacts of these changes so I'm very clear that I've understood what you've said. Treasury haven't undertaken specific analysis on how these tax changes impact productivity. They come up with some aggregate number based on all of the provisions that are within the budget and say, 'This will be the overall impact.' Are you saying that you don't have to hand an itemised list of the productivity impacts of every budget measure? Obviously, every budget measure aside, specifically what I'm interested in hearing about today are the CGT changes and the negative gearing changes.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

The productivity assumption in the budget has a lot of inputs into it. It's not just the tax reform component. I think macro went through how they approached the task of getting all of those various inputs across the economy and the decisions that the government takes through the budget process in terms of having confidence about the productivity assumption that is provided in the budget documents. It's not something that's done on an individual, smaller measure. It's a built-up model of a lot of different pieces of information that feed into that 1.2 number. So, again, I'm not sure we can take it much further than that. The budget papers have been published. Treasury have explained how they came to those numbers that are provided in the budget.

In terms of productivity and the focus of the government, we've been clear in the documents around the productivity reforms in the budget—including on the regulatory reduction approach, the legislation and other decisions that are being made—about the effort that's going into productivity more broadly and making sure that we are throwing everything we can across government and across the economy to drive productivity growth. As we know from discussions in this place lower productivity growth has been a feature of the Australian economy for some time, and the decade to 2020 had the slowest productivity growth in 60 years. So this is not a new challenge for our economy. We're bringing new and additional effort into responding to some of those challenges. But, Senator Chandler, this has been something that's been a feature during your term of government in particular.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Minister, a concern from businesses, particularly in the tech space, that was raised repeatedly during the Senate inquiry was about the productivity impacts of these changes. I think all the business peak bodies came in and presented to the committee and raised concerns about the impact of these changes on productivity. So beyond the macro productivity number that is contained within the budget, subsequent to the budget being handed down in May and, as we went through this very short Senate inquiry process, noting that Treasury didn't have time to read every submission has Treasury done any further analysis to determine the productivity impacts of the CGT changes and the negative gearing changes specifically?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Treasury's work in terms of advising government on the numbers and the impact is reflected in the budget papers. Treasury has been undertaking continued consultations since budget day in a number of areas, and those consultations have led to a number of amendments which, as I foreshadowed earlier, the government will move. So Treasury has been doing continued work on these reforms and will continue to do so as subsequent tranches of legislation come before this chamber.

I think my earlier evidence remains. Treasury do a lot of analysis to inform the numbers that are reflected in the budget. That considered tax reform as a component of feeding into those productivity assumptions. If you look at some of the evidence to the committee through the submission process, some of the experts talk about this having small but positive impacts on productivity for the economy. If you look at the ANU Tax and Transfer Policy Institute's inquiry submission, it says the same as some of the independent experts who provided evidence, including in an open letter from some academic experts, which says:

The existing CGT discount rewards investment based on tax minimisation rather than genuine productivity. Replacing it with cost base indexation across all assets will help reduce that damaging incentive.

So Treasury's advice to government that leads to the numbers in the budget has been addressed at estimates. The further work Treasury's been doing has really been consulting on those areas we identified on budget night.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Minister, again in reference to some of your previous answers, you yourself have been referencing responses to questions on notice in relation to the Senate committee inquiry into these bills. My understanding is that those responses to questions on notice were circulated by the relevant Senate committee at five minutes to midday—so a bit more than 35 minutes ago. I note that it's not an instantaneous process by which Treasury sends responses to QONs to a Senate committee and they are circulated for senators to read. I was wondering whether you could tell the chamber at what time the responses to these questions on notice were provided to the economics committee for circulation.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

My understanding is that it was at close of business on Monday.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Thank you for that, Minister. I want to turn to some of the small-business concerns that have been aerated through the committee inquiry process into this legislation and, indeed, more broadly through the media and through social media for those businesses that were not able to submit, submitted but didn't have their submissions processed, or weren't able to present at the Senate inquiry. Minister, even after your amendments to take the turnover threshold for the small business concession to $10 million, nine out of 10 small businesses remain worse off, as you have removed the 50 per cent CGT discount, which could be stacked with small-business concessions. Why do you continue, then, to claim that small businesses are protected from your CGT changes?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I'm not certain, Senator Chandler. I'm just trying to understand. You said 'nine out of 10'. I'm not sure where you got that figure from in your question. What are you referencing? I'm just asking in order to understand. The advice to me is that we're making changes about how the concession is calculated. We're not taking away the concession, so small businesses obviously will have that. We're raising the turnover threshold from $2 million to $10 million for the existing component—I think there are four components in small business, potentially, depending on what you're eligible for. One of them is the existing 50 per cent active asset reduction. We are increasing that turnover threshold from $2 million to $10 million, but the new way of calculating the CGT concession will still remain available.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Minister, you've still removed the 50 per cent CGT discount that they otherwise would have had.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Yes, but we're replacing it. That is changing; that's the reform. It is moving from a flat 50 per cent concession to a concession that seeks to tax real gains after adjustments for inflation. I may be misreading this from you, but the idea that we're just removing something and not replacing it, or not having a different way of calculating the concession or the discount, is not correct.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Minister, have you undertaken any analysis to determine what the difference will be for businesses if they have the 50 per cent CGT discount removed from them as an option and then have your new way of undertaking these concessions? Have you undertaken analysis to demonstrate that businesses will be better off under your new plan?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Yes, because the threshold has changed for a start. All those businesses that were operating above $2 million and below $10 million will now have access to the 50 per cent active asset reduction. This means all 2.7 million active small businesses, not just some, and 98 per cent of active businesses will be eligible for concessional treatment. This is on top of the other concessions, which we haven't gone to but which, depending on your circumstance and what you're doing when you make that gain or when you trigger that capital gain event, mean that eligible small-business owners pay reduced or no capital gains, including when the time comes to sell. We have an understanding of that. The increase in the threshold from $2 million to $10 million—and I appreciate the discussions the Treasury has had with COSBOA over the last little while—has been an important adjustment to make under these reforms.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Minister, why did you not extend all four small-business CGT concessions to businesses with a turnover under $10 million? Why only the active asset concession but not the 15-year exemption, the retirement exemption and the rollover exemption?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

In terms of the government's decisions, lifting that threshold was the most effective way to reach all 2.7 million active small businesses. It aligns it with other small-business concessions. We believe that it, in the most affordable and effective way, deals with some of the concerns that have been raised since the reforms have been announced.

I thank my adviser for bringing this to my attention. If you go to Budget Paper No. 1, page 149, you can see there's a table there, box 4.2, which shows part of the issue we're addressing here is that under the 50 per cent CGT discount arrangements there were significant periods of time over the last 25 years where investors have been under-compensated for inflation. Moving to an indexation model will address that—you are taxing real gains.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Minister, if you were aligning the definition of 'small businesses' to $10 million, why are they not getting the 15-year exemption, the retirement exemption and the rollover exemption?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

We have looked at this. Ninety per cent of small businesses still get access to those concessions. But we think this is the most effective way to ensure that all 2.7 million active small businesses are eligible for concessional treatment in a way that both deals with some of the issues being raised by small business with us but also does so in an affordable way.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Minister, even after the application of the small-business CGT concessions, are small-business owners still subject to the 30 per cent minimum capital gains tax?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

():  Yes, they are.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Minister, it's been noted by the media that many single older women use limited recourse borrowing arrangements to provide for their secure retirement. Why is the government supporting taking this secure retirement avenue away?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I understand that some there have been some accountants who say they use this in a particular set of circumstances. I mean, I haven't actually seen the gender breakdown of limited recourse borrowing, but, as I understand it, buyers of about 4,000 properties per year, a very small percentage of the residential market, utilise limited recourse borrowing arrangements. And I should say, SMSFs are still able to purchase residential properties. The change here is that they can't borrow to purchase residential properties. We're responding, in fact, not only to the issue of the Council of Financial Regulators but also of the Murray inquiry, which found that these arrangements can represent a significant risk to some individuals' retirement savings, particularly when they have low-balance SMSFs with high asset concentration or personal guarantees. As Minister for Women, when I talk with women's organisations—

Andrew Bragg (NSW, Liberal Party, Shadow Minister for Housing and Homelessness) | Link to this | Hansard source

There's no systemic risk identified. None of it is right. It's all wrong.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Well, if I can answer, you can have the opportunity to ask questions. When I work with women's organisations and women's advocacy organisations right across the economy, in the non-government sector, in business, in industry, when they are talking to me about issues that affect women, they are definitely talking not only about housing but also about actually even being able to afford to rent a house to live in. It's around making sure they have superannuation. That's a good start. As you know, we have done a number of things to make sure that women get a better deal when it comes to superannuation, including boosting the low income super tax offset.

Andrew Bragg (NSW, Liberal Party, Shadow Minister for Housing and Homelessness) | Link to this | Hansard source

It's a scam.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Well, you think super's a scam? I know you think it's a scam, Senator Bragg, like everything about you and everything you say in committees. I understand what you think about super.

Andrew Bragg (NSW, Liberal Party, Shadow Minister for Housing and Homelessness) | Link to this | Hansard source

You're obsessed with it.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I'm not the one obsessed, Senator Bragg. With all due respect, your hatred and loathing, particularly of industry superannuation is well understood—

Andrew Bragg (NSW, Liberal Party, Shadow Minister for Housing and Homelessness) | Link to this | Hansard source

You're going out of your way to protect these big guys, and you're kicking the small people.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

and well known in this chamber—

Glenn Sterle (WA, Australian Labor Party) | Link to this | Hansard source

Minister, could you resume your seat just for a minute. I'm sorry to interrupt you. I know it's very tempting to take the interjections. It's not my time you're wasting, Senator Bragg. If you want the call, stand up, and I'll give it to you. Minister.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

That is well understood, Senator Bragg. So anything you say about super really should be seen through the lens that you don't think people should have super. We have a different view on that. We think superannuation and being able to live a dignified retirement with savings accumulated through your working life is an important part of the social compact we have here in this country, and we don't resile from that. We have, since coming to government, looked at ways to make the system fairer and stronger—except that you, I think, have voted no to any of those reforms.

Going back to the question around women, the issues that are raised with me around super and women and how to get a better deal are: how we make sure that women are paid properly for the work they do; how we close the gender pay gap because, when we're doing those things, women will get more super into their superannuation account; how we compensate for periods of time away from work, like paid parental leave—and we're dealing with that—and, for those on lower incomes, the lower income super tax offset which we are adjusting and increasing. They have all been part of our thinking. So I don't know that any criticism of the government in terms of how we approach the question of superannuation and women is warranted. This is a decision taken quite separately to that around risks to financial stability and ensuring that people's retirement savings aren't impacted by decisions to borrow against their SMSF.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Can we just go back to the new limited recourse borrowing arrangements. Which superannuation industry bodies did the government consult with regarding this amendment before agreeing to it, and on what dates did those consultations occur?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I don't have that information available with me. This is an issue that has been around for a long time. It was first raised in 2014 under your government obviously in another area. We saw you get some information and do nothing about it, as is symbolic of that period of time in government. You got a whole lot of information about a whole lot of things, and you did nothing about it. Add that one to the list. So this is not a new issue in terms of people raising it. I don't know that I'm going to be able to provide an answer to when, who, how—all of that—but I will see what I can provide if there is anything further.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

In relation to whether there's anything that you're able to provide further, Minister, I note that the Treasurer has referred to advice from the Council of Financial Regulators in 2019 and 2022 relevant to these changes. Will the minister undertake to table that advice in full and confirm whether that advice recommended prohibiting these borrowing arrangements?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

My understanding is that those reports are public. In the Council of Financial Regulators 2022 report, it says:

LRBAs may present a significant risk to some individuals' retirement savings, particularly low-balance SMSFs with high asset concentration and/or personal guarantees.

The earlier inquiry, though—the one that your government received—the 2014 Murray Financial System Inquiry, says:

Direct borrowing by superannuation funds … is also inconsistent with the objectives of superannuation to be a savings vehicle for retirement income.

It goes on to say:

… prohibition … would preserve the strengths and benefits the superannuation system has delivered to individuals, the financial system and the economy, and limit the risks to taxpayers.

That was from the Murray inquiry.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

The Treasurer has stated that the changes to limited recourse borrowing will improve the budget position by $50 million over the forward estimates. I was wondering whether the minister could tell the chamber on what date Treasury first provided the government with a costing for this measure and on what date Treasury first provided advice recommending it.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I don't know how we take things on notice in this process. There was advice provided following the committee inquiry hearings where this issue was raised, and I would expect that the costing—an indicative costing—would have come alongside or just after that. The Treasurer did say, in his media conference when announcing this, that it's an indicative costing and it will be updated in the Mid-Year Economic and Fiscal Outlook at the end of the year, as is normal for any decisions taken post-budget. We update them in the next economic update.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Thank you, Minister. I note that you have endeavoured to provide that information in whatever way possible. So that I'm very clear, you said that the costings and the advice were likely provided following the committee inquiry. I don't think I've paraphrased you too much there. Was that following the inquiry or was that following the tabling of the report into the inquiry?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I don't know that I can be any more specific than I've already been. In relation to the decision the government has taken, which was announced, I think, on Thursday—we made some announcements on Thursday last week and then announced earlier this week—my understanding is that the advice on limited recourse borrowing was provided from Treasury post the committee hearing. If I can be more specific than that, I will.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

So, at some point between the Senate committee hearings wrapping up and the Treasurer announcing the changes last Thursday, it would be fair to say that the advice and the costing had been provided?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Yes. Sorry—I wasn't clear in my earlier answer, but I was saying on Thursday, so before, because I think the committee reported on Thursday. It was Thursday or Friday; I can't remember. It was last week sometime. We made some amendments. We made an announcement about amendments on Thursday last week, which go to the small-business arrangements, some of the decisions we took on testamentary discretionary trusts and a few other things. The decision was reflected in the announcement on limited recourse borrowing. The announcement was made on Tuesday this week.

Claire Chandler (Tasmania, Liberal Party, Shadow Minister for the Public Service) | Link to this | Hansard source

Minister, I'll move on to a different topic: the impact of your tax changes on housing. We know that the budget says 35,000 fewer homes will be built as a result of the CGT changes and the negative gearing changes. We also know that the reason any houses are being built is that the infrastructure fund you borrowed from a previous coalition policy we have indeed since matched and increased. Minister, I was wondering whether you had a breakdown of how many of those 35,000 fewer homes that will be built under these changes are as a result of the CGT changes in schedule 1 alone?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

This goes back to our earlier discussion. It's not broken down by impact on capital gains alone. The advice feeds into the figure, is my understanding, of the impact on 35,000 over the next decade, and that's comparing just on the tax changes. So, as you say, we've made a range of other decisions in the budget papers and in the budget measures which will increase housing supply by 30,000 because of the investments we're making in the housing infrastructure side of the budget. That 35,000 dwellings number is not broken down by a particular change to just one element of the package.

Glenn Sterle (WA, Australian Labor Party) | Link to this | Hansard source

Before I call Senator Chandler, I notice that Senator Pocock is waiting patiently. Senator Chandler, I'm keen to share the call around if we can.

David Pocock (ACT, Independent) | Link to this | Hansard source

I seek leave to withdraw amendments to the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, standing in my name, on sheets 3878 and 3898.

Leave granted.

I withdraw these amendments. I have been provided with assurances from the government in this chamber earlier, including by Minister Gallagher, that they will address the issues I've raised regarding the need to preserve grandfathered CGT and negative gearing concessions in the case of death or divorce and will give effect to this in the next tranche of legislation.

I don't think this is ideal. This should have been sorted out in this primary legislation. The Senate should have had more time to actually look at these issues that we are identifying. However, I'm prepared to take the government's commitment in good faith and therefore will no longer proceed with the amendments, which will be a couple of votes less in the guillotine.

I do want to say, though, as a crossbencher, that the government's language is a little bit disappointing. They're saying that this is something that they knew about all along and were going to address, and yet, just this morning, we had ministers on the radio saying that it wasn't an issue and it was just how the system worked and there was nothing to see here. I just want to note as a crossbencher that, when you engage in good faith with amendments, it seems like the Labor government has this default position on private senators' bills on amendments. Unless they absolutely have to, they don't really want to entertain any, and I think we could have far more constructive politics.

But these amendments do go to fairness and also ensure that this legislation doesn't disadvantage predominantly women, who, as I said yesterday, statistically outlive us men and have less superannuation savings. Clearly, if you look at the case of death or divorce, this is something that we need to be taking into account. I thank the government for its good faith commitment and the Treasurer's office and his staff who have worked on this. I look forward to seeing the government deliver it in the next tranche of legislation.

Glenn Sterle (WA, Australian Labor Party) | Link to this | Hansard source

Thank you, Senator Pocock. The Senate notes that you've withdrawn your amendments.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Just to follow on from Senator Pocock, because I did try to address these when he wasn't in the chamber, I have a couple of things. I take your criticism—well, I don't accept it, but I note the criticism you made of the government. I would say that we try to engage in good faith in this chamber. The door is open to anyone who has ideas and amendments and suggestions. But that requires crossbenchers or members of the opposition also putting those forward.

I understand there was a crossbench briefing yesterday that went for nearly an hour. Some of the issues, Senator Pocock, that you've raised through amendments were not raised through that forum. That's your choice about whether you use that forum for that. I'm just saying that it's not just a one-way street. You could have raised some of your concerns around this with the Treasurer, engaged and sought a way through.

Andrew Bragg (NSW, Liberal Party, Shadow Minister for Housing and Homelessness) | Link to this | Hansard source

You're a very naughty boy!

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

No, I'm not saying that, Senator Bragg. I'm not saying that. I'm just saying it's not a one-way street here. My understanding, and how I choose to work, is that my door is always open. If anyone comes and says, 'I think you need to amend your bill,' or 'This is a particular concern,' then I sit down and talk with them about it. I may agree with them, or I may disagree with them, but I try to get to the bottom of it. I think that goes for the Treasurer and other ministers as well.

Yesterday, Senator Pocock, you raised this in question time. In my answer I said that because there are a number of different ways, and because the system is complex, big reform is complex. I said earlier that the GST reform, A New Tax System, took 30 bills to implement because of these different interactions that happen across the tax legislation that exists in Australia. It is not unusual to have an overarching piece and then do subsequent pieces of legislation. Particular circumstances and arrangements—whether it be inheritance, marital breakdown, tenancy arrangements or a whole range of things—will need to be worked through and responded to in subsequent tranches of legislation where there is obviously open room for debate on all of those things.

The government had been clear that this was going to be our approach. We made clear on budget night that there would be a series of bills that implement the decisions. But in order to get these ones locked down, the overarching architecture has to happen before you can do subsequent pieces of legislation. It's the nature of how you approach this task. We have TLABs in here all the time because of that. Treasury laws are constantly being amended because of the various ways changes interact across different pieces of the statute. Dealing with this piece allows the focus on the second piece which will deal with a lot of these specific interactions and how they occur.

I think I've been clear in a number of interviews, and the Treasurer has been clear in a number of interviews, that we're aware of the fact that we need a second piece of legislation and that we will be dealing in there with some of the more specific interactions and complex interactions that exist across the tax legislative program.

David Pocock (ACT, Independent) | Link to this | Hansard source

Thank you, Minister, for that. We do appreciate the briefings. I always took what happens in there to be confidential, but, given that you're wanting to tell everyone what questions I didn't ask—

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I didn't mean to breach any confidentiality.

David Pocock (ACT, Independent) | Link to this | Hansard source

For people's understanding, there are a whole range of bills, and it's fairly rapid fire; it's not like you get a chance to go through every single one of your amendments or concerns about bills. It's a good thing that the government does, but it is in no way an opportunity to talk at length about suggested amendments.

As to the GST bills, there was also a three-month Senate inquiry into those changes through a select committee. I think that's in stark contrast to what senators are having to deal with when it comes to these changes, which was an almost farcical, compressed Senate inquiry. A huge number of concerns were raised, and the government palmed most of them off, saying, 'Sure, we'll deal with them down the track.' A lot of stakeholders are rightly concerned. As someone who actually agrees with the intent of these bills, my argument has been that if it's about closing loopholes, let's do it properly. I don't understand why there is such an urgent rush for changes that only come into effect down the track. Surely, we should just get this right. I think the Greens had an opportunity to do exactly that—to make sure that we are closing the loopholes and that we are creating a tax system that rewards hard work and taxes sweat less than it taxes equity.

I appreciate the minister's commitment on this, but some of it's hard to cop when you're really scrambling to get stuff drafted—we've talked about drafting resources so many times as a crossbench. We agree with the intent of the bill. We're putting forward amendments in good faith, and then we're somehow accused of not engaging.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I'm sorry if I've breached confidence. That was not the intention of making that remark, but I am responding to the fact that there are multiple avenues for discussions to occur. You criticise the government. I'm merely saying that there was plenty of opportunity for discussions to be had on these matters well before this committee stage of the report. In relation to the inquiry, there has been a Senate select inquiry into this that did go for some period of time.

These issues have been well ventilated in public debate over a number of years that I can recall. This legislation seeks to provide the certainty that the reforms are changing. The reforms are being made. It provides certainty about the way forward, and then the subsequent opportunity for extensive discussion and consultations will happen on the second piece of legislation, and I would encourage everyone who's interested in that to get involved and to engage and to engage early. We as ministers stand ready to support those consultations.

Andrew Bragg (NSW, Liberal Party, Shadow Minister for Housing and Homelessness) | Link to this | Hansard source

I have a couple of questions on housing, but, before I do that, I seek leave to withdraw amendments on sheet 3893 please.

Leave granted.

I withdraw the amendments on sheet 3893. Effectively, this budget has now been announced four times in four different ways. On 30 May, you had the main budget. On 18 June, you announced a bunch of different changes for small businesses. On 23 June, you announced the self-managed super fund thing. On 25 June, today, you announced you're not going to do the death and divorce tax. On what basis is the original regulatory impact analysis actually valid? Which model of these four budgets did you actually cost?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Another wonderful contribution from Senator Bragg—cynical, treats it like it's a bit of a joke, a bit funny, a bit schoolboy, a bit university. This is significant and serious tax reform. You might find it funny and entertaining. We flagged on budget night that there would be further consultations in a number of areas. We are doing that. We flagged on budget night that there would be several pieces of legislation. That has not changed. The arrangements and the budget we tabled is the tax reform we are proceeding with, with some amendments that we have responded to now. Either you don't respond to ideas that come forward and then we're criticised for not responding or, where we can reach agreement and make sensible adjustments to the overall package, you criticise us for that. One might think that maybe you don't support this overall tax reform, Senator Bragg, and that you're going to criticise whatever happens, and you'll see it in the cynical lens through which the opposition has chosen to view this important reform.

As someone who's so fixed on housing—and you are. You've been focused on this in the last term and this term. It's a shame that you weren't as focused on this in the government that you were a member of, when they built about 370 social and affordable housing properties over a decade. They could've done with your level of interest on this that you have now, when you were actually in a position to make decisions and deliver on them. Anyway, let's put that aside. I think, if you weren't a member of the Liberal Party, you would support these changes to negative gearing and capital gains tax because you know that what we say is true.

The distortion that exists in the housing market and its intersection with the tax system at the moment is not working in the interests of every Australian. It may be working in the interests of some, and that's fine. Those laws and the arrangements are there as they are today. But, when these laws change, we think it will be a better and fairer system for a lot more people. Senator Bragg, I've watched you talk about housing and I've listened to what you have said on it, but I can't reconcile your focus on housing in this country as a key economic and social priority with your opposition to these changes. I can't reconcile them. Therefore, I have to think that you don't think that; it's just because you're over there that you have to take this political position.

It's really clear that first home buyers and younger generations have been competing with investors for established housing in this country and have often lost out because they are not able to avail themselves of the concessional treatment that the laws currently allow in order to compete on a level playing field. We think that's wrong. We think the system as it stands now, the status quo, that you seek to protect is broken, and these reforms tackle that. This is the budget we tabled on budget night. These are the laws that we're debating that relate to those decisions. We've made adjustments where it's sensible, reasonable and affordable to do so. We think a government that listens and responds is a good thing, and we will bring forward further legislation to implement the full package over this calendar year.

Andrew Bragg (NSW, Liberal Party, Shadow Minister for Housing and Homelessness) | Link to this | Hansard source

In the interest of time and given that the minister wants to make political speeches, I'll note a few things for the record, because I think this is an important process of our parliament. What we don't have as it stands, given you want to pass this bill today, is any sense of what the definition of a 'new build' would be. I know you've flagged it'll be in future legislation, but I would've thought, if you were going to crow about some sort of a tax reform on housing, that the housing tax reform—noting the bunny ears here, as an indication of my view that it's not really reform, because $77 billion in new taxes is not tax reform when you leave the country with the highest 'pay as you go' system and the highest 'capital gains tax' system in the English-speaking world. But I note that we have no sense of what the definition of a 'new build' would be, which I would've thought would've been pretty germane to this endeavour, but apparently it's not.

The other thing that we don't have is any explanation as to the question I asked before, when I received a political torrent, in relation to the regulatory impact analysis and which version of this budget was actually put through the analysis. We also don't have any sense of why there's been a distinction in this new reform, as you said, between a new build and an existing home in relation to your principle reforms. But, then, when you come to your reforms to prevent certain funds from investing in houses, we have no sense of why you have not chosen to make a distinction there. As far as we can see, you're wanting to stop all SMSFs from borrowing to invest in housing, irrespective of whether that is an existing house or a new house.

We also have no explanation as to the government's response to the many esteemed economists that have predicted significant increases in rents. As Senator Chandler canvassed before, we have no real understanding of the modelling done on the 35,000 fewer houses. Every time we've sought to ask detailed questions about how you have modelled these 35,000 fewer houses, all we've been able to hear is political responses that this has been offset with infrastructure funding. I think it is a reasonable line of inquiry for us to understand exactly how you can justify, and how you have modelled in detail, those 35,000 fewer houses. Most typical people would look at it and say, 'Why would any government want to reduce any supply endeavour at the moment?' But this fourth iteration of this budget reduces supply in two areas; it reduces supply by 35,000—that is the Treasury's own number—and then it will also reduce supply by preventing certain investors from investing into houses, including new houses. Those are the main questions I have. I'd put them separately, but, given the propensity for lengthy political speeches, I thought, for the efficiency of the chamber, I'd put them all at the same time.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I appreciate that, Senator Bragg. You're usually pretty direct and straight to the point.

On the new builds and the definitions, we have been clear that we will bring back those definitions. The budget paper already sets out the core elements of a new build for the purposes of the tax changes. It says: 'A new build is a dwelling that genuinely adds to new housing supply and includes a new constructed apartment off the plan, a duplex constructed through a knock-down rebuild replacing a single house, thereby increasing the total number of dwellings. Any residential construction on previously vacant land, a knock-down and rebuild, isn't a new build unless it adds to the number of dwellings. For example, two townhouses replacing one house and a substantial renovation isn't a new build if it doesn't increase the number of dwellings.' What we are consulting on, to bring back through the second piece of legislation, is the drafting of those principles into legislative content, and we will continue to work through those. Senator Bragg, you will have plenty of time to apply scrutiny to those definitions. We're doing this to provide as much certainty on the implementation details on the government's tax reform as possible.

In relation to the assessment of the budget and whether anything further has been done, the analysis that was done for the budget remains. In terms of impact on renters, I think page 158 of BP1 should answer some of your questions. Box 4.4, 'Housing measures in this budget', talks through the additional 75,000 Australians that we expect will buy their own home over the next decade, driven by these reforms, and the new 30,000 homes that are supported by our investments in infrastructure. It goes through the impacts on house prices, I think, and the impacts on rent:

The reforms are likely to have a small impact on rents, with an expected increase of less than $2 per week for a household paying the current median rent.

As we all know, that analysis is based on the reforms. We know there are many different factors that affect how the housing market operates. But we believe the analysis in the budget provides people with the information they need to understand how Treasury expects these reforms to impact across the economy.

Pauline Hanson (Queensland, Pauline Hanson's One Nation Party) | Link to this | Hansard source

This is the worst budget that's been handed down. The public are having a say over this. All this is is a tax grab because you, the government, cannot rein in your spending; that's what this is about. You're going to rip $77 billion out of the taxpayers' pockets—more taxes going your way because you can't control your spending. That's what this budget is about.

You talk about investment. We're keeping people out of the investment market. Why has that happened? It's because we've had the highest immigration into this country basically in history under this government. In 2022-23 we had 739,000 people arrive. Yes, there might have been a couple of hundred thousand that left, but high immigration has caused the squeeze on the Australian people in terms of being able to get into housing. This is what I've been on and on and on about—high immigration.

Another thing too is foreign investment. You have not reined in foreign investors in the country. You worry about the Australian investor. You want to shut them out of it. You've done nothing. Only after I spoke about it prior to the last election did you finally put a stop to foreign investors for two years. But you keep bringing so many people into the country. What are you doing about the foreign investors that are here in Australia to ensure that Australians can have homes?

It's so frustrating to listen to your concern about the Australian people because so many people are homeless in this nation. There are 130,000 living in their tents, living in their cars or couch surfing. They don't have a roof over their heads. But you kept bringing in immigrants regardless of what the people said. Therefore, we're in the predicament that we are in. This is nothing but a scam. Your whole policy, even that $10 billion housing policy, which never built a house for years—you have never been able to produce that at all. Then you have a go at us, saying, 'One Nation never supported housing policy.' I'll support good policies, but I won't when I see it's rubbish and smoke and mirrors from that mob over there. You're really not doing anything.

You think you're fooling the Australian people. What you've done is put them in poverty in this nation with your policies because you can't rein in your spending. Why have we got an Aboriginal ambassador that's travelling the world at a cost of $800,000 and has done absolutely nothing—no reports—and we're paying them $400,000 a year? I thought our issues were here in Australia, not travelling the world. This is where the money's gone. Why is there $600 million for Papua New Guinea for a footy team? I can go on and on and on about the waste of money that you've allowed, and now you want to put your hand into the pockets of Australians again over this.

You talk about investment in the country and you talk about negative gearing. There's no aspiration whatsoever for those future generations. Those people have watched their parents, who are from my generation, be given the opportunity to invest in housing. You could rent it out. That rent could actually pay off the mortgage, and then eventually you could actually sell it for a profit, which would help you later in life, which we have done. And now we're trying to help our kids as well. That was aspiration, not just socialist policies.

What you want to do is get rid of investments in Australia by the Australian people. Most of your investments in Australia are coming from police, nurses, paramedics—these sorts of people—who have an opportunity to invest for their future. Heaven knows how the hell they're going to support themselves. I can't see them getting the age pension, because there won't be the money under this government. We've got $380 billion coming in in revenue in this area, and we're paying out over $300 billion in welfare in this nation. We won't be able to support future generations in aged care. Even the pensioners now are suffering. You can't even support the 100,000 pensioners waiting for packages. It's a tax grab.

You talk about capital gains tax. Again, I want the people to understand what this is about. I've worked hard. I've paid my taxes and PAYG tax. I've then gone and used that money to buy myself some jewellery or whatever it might be. I've bought myself something with that. When I bought that piece of jewellery, I paid tax. You robbed me of another 10 per cent of my hard-earned money. You took another 10 per cent in tax off me.

Under your bill, when I want to go and sell that piece of jewellery or that painting or whatever I may have bought, which may have increased in value, you now want to put your hand in my pocket again and you want to profit. You want to take from that increased value of that piece of jewellery or that painting or whatever I might have. You want to take that from me again. You want to take the profit from it. Of course, I've got to get that all valued and I have to put down on paper what it's worth, and you want to take the profit from me. Tell me, if I actually make a loss on that, are you going to reimburse me in my tax? Where do you stand on this? Where do you stand on taxing people on the assets that belong to them? Why do you think that you have the right to put your hand in the pockets, again, of all those Australians out there because they've decided to buy themselves something that they may value, and rip them off again?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Sorry, I must have missed the question at the end there. I think it was about losses. I mean, if you make a loss on your asset now, you can—

I've got the floor.

Pauline Hanson (Queensland, Pauline Hanson's One Nation Party) | Link to this | Hansard source

You don't know what you're answering.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

I'll answer that part of it.

Pauline Hanson (Queensland, Pauline Hanson's One Nation Party) | Link to this | Hansard source

I'm quite happy to tell you what my question was.

Dorinda Cox (WA, Australian Labor Party) | Link to this | Hansard source

Senator Hanson, please take your seat. The minister is on her feet, and she has the call

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

With all respect, I was trying to get some advice to answer components. You had quite a lot in that; it wasn't a single question. There was a range of issues that you raised that I was seeking advice so that I was in a position to answer you. If you make a loss on an asset, you can offset that against other income, so that doesn't change. I hope that addresses that question.

Just to be clear, we are changing the way a concession operates. We are not changing the fact that there is a concession. If you look at the budget papers across all asset classes, there are big periods of time where the current arrangements under compensate investors because it's a flat 50 per cent. It's all there in the budget papers. The model we are moving to adjusts that rate so your concession is made based off the real gain adjusted for inflation. So it's not that there is no concession. The way the concession is calculated is different and is more neutral to ensure that there isn't an overwhelming advantage to investing in established housing, which has had flow-on impacts onto the housing market.

In relation to your criticism of the budget as a whole, this government are proud of this budget, accept that you disagree with large parts of it and accept that you wouldn't support the decisions we have made. But we are determined to make sure that younger generations are able to purchase a house and are not competing against investors, which is the problem that's happening at the moment. Now, you can shake your head, Senator Hanson, but that is a problem. You talk to first homebuyers, and I've talked to some since the budget, where they have attended auctions and for the first time are not competing against investors who get a tax concession to bid against them. They don't get that same opportunity, so we are very focused on making sure that happens and also on making sure that wages earned through work are not doing the heavy lifting, or are more fairly balanced with the tax arrangements that exist for tax on assets, because at the moment that isn't treated as equally as these reforms would allow.

Ross Cadell (NSW, National Party, Shadow Minister for Water) | Link to this | Hansard source

My concern over the last 24 hours is about having to have older and historic cars valued before 1 July next year. I've got a mate, Nick, in Melbourne, who is rebuilding a HK Holden. It won't be together by 1 July next year. How do we go from a zero value on a car that is not built? Everyone knows every car restoration project becomes 'that one-year project is the best three years of your life'. How does he go about getting a value on something that's not built?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) | Link to this | Hansard source

Senator Cadell, cars and motor vehicles are exempt from CGT, and this includes vintage or classic cars. This is not changing. Those current arrangements apply. It's clear on the ATO website. An ATO determination sets out that even where a car is a collectable, it still remains a car for the purposes of this exemption, and any CGT is disregarded.

Dorinda Cox (WA, Australian Labor Party) | Link to this | Hansard source

Senator Hanson, are you seeking the call?

Pauline Hanson (Queensland, Pauline Hanson's One Nation Party) | Link to this | Hansard source

Yes I do.

The TEMPORARY CHAIR: Senator Hanson.

I just want you to clarify, if I own a piece of jewellery—

The TEMPORARY CHAIR: It now being 1.30 pm, pursuant to the order agreed to on Tuesday, the time allotted for the debate on these bills and the two further bills has expired. I will now put the questions before the chair. Senator Chandler?