Treasurer Jim Chalmers has not backed away from the “political risk” associated with Labor’s sweeping reforms to the capital gains tax discount and negative gearing, accepting that it is on the Albanese government to explain why it backtracked on its election promise.
From July 1, 2027, the 50 per cent CGT discount will be replaced by a concession based on inflation and introduce a minimum 30 per cent tax on gains, Tuesday’s federal budget revealed.
The change will be paired with a stripping back of negative gearing, with the concession limited only to new builds.
However, anyone negative gearing prior to budget night was unaffected.
Speaking to reporters ahead of the spending plan’s release, Mr Chalmers said the government “can’t let the intersection of the housing market and the tax system lock out so many people from getting a toehold in the housing market, particularly young people”.
“Now I acknowledge this is a controversial change, and I acknowledge this is a government coming to a different view to the view that we held 12 months ago,” he said, adding that his “view is that when a government comes to a different view … for the right and justifiable reasons, the onus is on the government to explain why”.
The reforms were part of a several broader cost-of-living relief measures, ranging from tax cuts to healthcare.
Renting
Renters rights will continue to be a focus in the budget, and the Government has said Commonwealth Rent Assistance has increased by more than 50 per cent since March 2022.
Wage increases
The previously announced Fair Work Commission decision to phase out junior pay rates for retail, fast food and pharmacy workers aged 18 to 20 is also mentioned in this year’s budget.
Tax cuts
Among the broad tax tweaks was a yearly $250 rebate for workers starting from the 2027-28 financial year.
The new offset came on top of a $1000 instant tax deduction set to kick in on July 1 and last year’s Medicare levy threshold hike.
The instant tax deduction is taken from taxable income rather than a direct reduction on a tax bill.
Fuel costs
The budget accounted for temporary tax relief for businesses hard hit by fuel shocks spurred by the Iran war, letting them take longer payment terms and dodge upfront payments.
That measure came in addition to temporarily voiding the heavy vehicle road user charge and halving of the fuel excise.
All three kicked in on 1 April for three months, with the latter two costing the budget $2.9bn
The government also encouraged Australians to look at greener transport options, offering a 25 per cent fringe benefits tax discount for electric vehicles worth more than $75,000 from April 1, 2027, and then for all eligible EVs from April 1, 2029.
Healthcare
Healthcare was among the highest budgetary commitments, with the government pledging $25bn over five years to public hospitals and a further $1.8bn to Medicare Urgent Care Clinics.
It also earmarked $5.9bn over the next five years to expand Pharmaceutical Benefits Scheme listings to include treatments for cystic fibrosis, chronic kidney disease and various cancers.
