Updated ,first published
Labor’s budget agenda faces a fortnight in limbo as the Coalition, Greens and crossbench weigh Senate tactics and negotiate over how they can force longer inquiries to scrutinise the government’s tax changes and NDIS reforms.
The government passed its budget tax package through the House of Representatives on Thursday, combining into one bill the $250 income tax offset and $1000 instant deduction for workers, as well as curbs on negative gearing and capital gains tax concessions.
Earlier in the day, treasury secretary Jenny Wilkinson signalled the government would build on this with more tax relief for workers before the next election.
But Labor’s immediate plans now depend on horse-trading among senators who want to extend parliamentary probes into the new laws – the Coalition wants a longer tax inquiry, while the Greens want more time to investigate sweeping changes to the National Disability Insurance Scheme.
The government wanted to rush these through by the end of June – particularly the NDIS changes, which allow it to start cutting costs immediately – so each bill has been sent to a Senate inquiry with tight two-day hearing schedules that will report back before parliament resumes on June 22.
The Greens have told the government their red line is not wanting the NDIS bill passed in the next sitting fortnight, ending July 2. Labor could therefore volunteer to extend NDIS hearings and avoid the Greens working with the Coalition on a tax inquiry that promises additional political pain. However, any NDIS delays will also cost the budget’s bottom line.
Both bills are central to Labor’s agenda: changes to negative gearing and capital gains on all asset classes are part of a package that will raise more than $80 billion over a decade and shift the housing market, while the NDIS laws enable the government to remove 240,000 participants and cut spending by $38 billion over four years.
But senators are demanding more scrutiny as elements of both packages meet vehement opposition in certain parts of the community.
Reserve Bank governor Michele Bullock faced questions about the tax package and its impact on the housing market at Senate estimates on Thursday. She said the bank’s past analysis on negative gearing changes suggested they would affect investor demand.
“That might mean that it’s easier for first home buyers to get into the market,” she said. “It might mean there’s a change in the mix of housing.”
But while tax changes for housing have proven relatively uncontroversial, the tech sector, start-ups and small businesses are warning of unintended consequences in making those changes for other assets. The changes will replace the 50 per cent capital gains tax discount with an inflation-based model for all assets except new housing.
The NDIS changes are similarly raising alarm in the disability community. The Disability Discrimination Commissioner and the government’s own advisory group have warned that broad new ministerial powers to cut spending risk breaching people’s rights and the process must be slowed down.
The NDIS inquiry, which will hold its two days of hearings next week, has received more than 4000 submissions.
Independent ACT Senator David Pocock on Thursday morning said it was the Senate’s job to make sure the legislation was right as he accused the government of “actively avoiding scrutiny”.
“I’ll be working with all of my colleagues on this, scrutinising the detail, doing the job that people elect the Senate to do to actually make sure that these changes make sense, that we are minimising unintended consequences and getting it right,” he said.
“The government has tried to stitch up a really short student inquiry process that doesn’t cut it. These changes are complex, they do need time, and we should be looking at the impact on things like startups and small businesses.”
Labor tried to wedge its opposition by grouping all elements of the budget tax package into one bill.
But Pocock will push for Greens, Coalition and crossbench senators to use their collective majority and override Labor in the Senate by passing three elements – the tax offset, instant deduction and negative gearing – while withholding support for the capital gains element, which would be sent to a longer inquiry.
Opposition Leader Angus Taylor said the Coalition would “work with whoever we can to stop this toxic legislation getting through the Parliament”.
Ministerial powers baked into the tax legislation – which would allow the treasurer to tweak tax settings by giving additional asset classes the 50 per cent discount or redefining new housing – are also prompting claims of overreach.
Shadow treasurer Tim Wilson said the laws would give “huge carve-outs to the treasurer to basically act like he is a sort of king of the tax system”.
“The Greens are rightly alarmed, as the Coalition is rightly alarmed. And so, we’re going to apply maximum pressure and leverage because we need to remember, the Australian people did not vote for these taxes,” he said.
“The Albanese government tried to offer Australians 250 bucks.”
The Coalition has promised it will index tax thresholds to end bracket creep – the process by which people pay higher average tax rates as their incomes grow – if it wins the next election.
Wilkinson, at Senate estimates, signalled the government could go to the election with larger tax relief. “The government has stated that these reforms create the room for future tax cuts,” she said.
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