The federal government’s tax overhaul will head to a Senate probe as Treasury modelling reveals who benefited most from the regime.
Treasurer Jim Chalmers has tabled Labor’s capital gains and negative gearing overhaul to the lower house, with the bill now being sent to a three-week Senate inquiry.
On Thursday (28 May), Chalmers formally introduced the government’s first CGT and negative gearing bill to the House of Representatives, outlining an inflation‑indexed capital gains discount and new restrictions on property tax offsets.
The legislation also bundled in a flat $250 tax cut for wage earners and a $1,000 automatic deduction for work‑related expenses while leaving the detailed treatment of start‑ups, small businesses, and trusts to a second technical bill due to be put forward later this year.
Once the bill passes the House, it will automatically be examined by a Senate committee rather than going straight to a final vote.
That is because the upper house agreed earlier this month that any significant law due to begin on 1 July must be subject to a short inquiry reporting by 22 June.
The mechanism effectively guarantees a few weeks of formal hearings and submissions but falls well short of the lengthy review process the Coalition had pressed for.
The Greens, who hold the balance of power in the Senate, have backed the tighter timetable while making clear they intend to push Labor harder on equity.
In a joint statement, party leader Larissa Waters and economic justice spokesperson Nick McKim said a compact inquiry would still allow thorough examination of the package.
“We will use this inquiry to examine how and why Labor decided to leave in place the vast majority of tax handouts for the ultra-wealthy,” the statement read.
An inquiry report by 22 June would give the government a fighting chance to secure Senate passage before the winter recess on 2 July.
Albanese and Chalmers set expectations on carve‑outs
On Monday, Prime Minister Anthony Albanese said that Treasury was sounding out business and industry groups ahead of the second bill.
“Treasury are going about consulting, not just in tech, but consulting with the Council of Small Business Organisations, for example, Australian Chamber of Commerce and Industry, the Tech Council,” he said.
However, on Thursday, Albanese narrowed expectations about how generous those exemptions would be and said the government’s aim was to close existing loopholes rather than create new ones.
“What we don’t want to do is to shut down some loopholes and create others. That’s the whole point here,” he said.
“What we’re doing as part of tax reform is increasing the integrity of the system, so people shouldn’t expect big changes.”
Chalmers has also reinforced that message, signalling that any relief would be tightly targeted at smaller operating businesses.
He said the scope of the possible exception would be confined to “small and start-up businesses where indexation is applied to a low or zero cost base”.
Treasury modelling highlights skew towards high earners
Treasury Secretary Jenny Wilkinson, speaking at an Australian Business Economists event in Sydney on Thursday, unveiled modelling that looked at the impact of the changes.
Wilkinson said the overall package was expected to tilt the system towards younger and middle‑income households.
“The cumulative impact of the reforms is assessed as benefiting around 90 per cent of young people, before impacts in the housing market are taken into account,” Wilkinson said.
She said that had the proposed settings applied since the turn of the century, today’s cohort of under‑30s would have been in a stronger financial position.
“Around 90 per cent of Australians would have been better off by age 30 had the proposed changes been in place from 2000,” she outlined.
She added that the top 1 per cent of income earners would have paid roughly $400,000 more in tax over their working lives if the laws had been in force for the past 25 years.
Wilkinson said that under the current rules, “the lifetime benefits which flowed from the combination of the existing capital gains tax, negative gearing and trust arrangements delivered the typical top 1 per cent income earner since 2000 more than $700,000 over their working lives”.
Wilkinson said that if the CGT, negative gearing, and trust changes had applied since 2000, the typical subsidy enjoyed by a top 1 per cent earner would have been closer to $300,000 and that “60 per cent of the extra tax raised by the changes would come from the top 10 per cent of all income earners”.
Investment fears and home ownership goals
Wilkinson also used her speech to contest the argument that replacing the flat 50 per cent CGT discount with an inflation‑indexation model would damage productive investment.
“OECD research suggests there is not clear evidence to support favourable treatment of capital gains to promote investment, beyond compensating for inflation,” she said.
She closed by tying the tax debate back to the housing market and the balance between taxing work and wealth.
“Our assessment is that these reforms will contribute to arresting the decline in home ownership rates, improve the efficiency of the taxation of capital, and support a modest reduction in the tax burden on labour income,” Wilkinson outlined.
[Related: Albanese locks in CGT, negative gearing bill date]
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