Updated ,first published
Treasurer Jim Chalmers has given a clear sign any changes to capital gains tax and negative gearing will be accompanied by transitional arrangements that will give some protection to people who already hold assets, downplaying suggestions of a surge in revenue from housing reform.
Senior ministers are expected to sign off on the key tax reform elements in the May 12 budget in coming days, with a reduction in the CGT concession and an overhaul of negative gearing two key elements of a package that is also expected to provide new incentives for business investment.
Previous analysis of the complete abolition of negative gearing – a process by which a landlord can reduce their total taxable income through losses on their rental properties – has estimated it could raise up to $5 billion a year.
But Chalmers told a podcast with the Commonwealth Bank that suggestions of such a large and immediate increase in revenue were incorrect.
He said if the government went ahead with any change it would take into account previous decisions by investors, suggesting transitional arrangements will be put in place or those with existing assets.
“People assume that all of a sudden, a huge amount of revenue will show up that you can automatically and immediately give away, and most people who think deeply about those tax changes that you have asked me about would understand that there wouldn’t be a heap of revenue,” he said.
“Without getting into hypotheticals about policies, what you try and do is to make sure that we recognise the decisions that people have taken in the past.”
In a separate interview with Channel Seven on Thursday morning, Chalmers doubled down on his warning that people should not expect a big increase in revenue.
“People shouldn’t expect there to be this huge amount of new revenue show up over the course of the next few years in the budget,” he said.
Chalmers told Seven that all of the changes around housing were aimed at giving younger people a “toehold” in the property market.
He said boosting supply remained the best way to help young people.
“I think a lot of us are very concerned about, over time, the way that there are fewer and fewer younger people who are able to buy their own homes. So housing supply is the main game,” he said.
Outside of tax changes, the budget is expected to contain a savings package and measures aimed at boosting the speed at which the economy can grow without adding to inflation. Figures released on Wednesday showed inflation at a three-year high of 4.6 per cent, in part due to the war in Iran and its impact on petrol prices.
Chalmers told the Commonwealth Bank podcast that productivity, from reducing compliance costs to the use of AI, would be a key feature of the budget.
“What people will see in the budget, if I can land this productivity package in the next week or so, is people will see a genuine effort to do quite a lot on productivity. Part of that’s AI, but there’s a lot of other stuff in there too,” he said.
Changes to property taxes are being signed off as the government makes some ground but remains behind its target to build 1.2 million homes by mid-2029.
The National Housing Supply and Affordability Council this morning released its third “state of the housing system” report.
It found that in the five years to 2029, the country is now on target to build 980,000 homes. That’s 42,000 up on its estimate from last year, but still more than 200,000 behind the 1.2 million target. But the council warned that the war in Iran had increased uncertainty to the housing supply outlook, with higher oil prices increasing pressure across the construction sector.
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Shane Wright is a senior economics correspondent for The Age and The Sydney Morning Herald.Connect via X or email.