Treasurer Jim Chalmers says Labor “cannot ignore” pressures slapped on younger Australians in next week’s federal budget, giving his strongest indication yet that capital gains tax (CGT) and negative gearing reform will be a feature.
“There are genuine intergenerational concerns and pressures in our budget, in our tax system, in our housing market and in our economy more broadly,” Mr Chalmers told a press conference on Monday.
“A government like ours, a responsible government, cannot ignore the very real pressures and concerns that people have in our communities.”
CGT is paid on the profit made when an asset sold has increased in value.
But there are two key concessions.
The first is an exemption for family homes in which property owners selling their main residence are typically exempt from the tax.
The second, and more controversial concession, is a 50 per cent discount for property owners who hold an investment for more than 12 months.
Critics argue the discount makes property too attractive to investors and stacks Australia’s supply-starved housing market against first-home buyers, especially when combined with negative gearing, which lets investors deduct rental losses from their salary.
A Greens-led parliamentary inquiry into CGT found in March that the “benefits of the capital gains tax discount are … unequally distributed, with implications for income and wealth inequality and intergenerational inequality”.
“Obviously, we calibrate our budgets to the conditions that we confront, and I think the intergenerational pressures are really serious,” Mr Chalmers said.
“Now, we recognise and respect the really big contribution that older Australians have made and continue to make to our country and to our economy.
“But a lot of Australians, and particularly younger Australians, are finding it really difficult to get into the housing market.
“That’s not the fault of older Australians. It’s the fault of successive coalition governments who didn’t take housing seriously enough.”
He went on to say that, in his experience, many older Australians understood and shared “intergenerational concerns”.
“So this will be an ambitious budget,” Mr Chalmers said, adding that it “will take into consideration the real pressures and concerns that are broadly shared by Australians” and “begin a year of more ambitious reform”.
