EDITORIAL: No sign of end to Budget chaos and confusion

At the end of the week the Government’s concern over the Budget backlash was showing.

Prime Minister Anthony Albanese — who had been badly damaged by memes by startups and small businesses worried about the capital gains tax changes — felt the need to take to social media to offer explanations in a bid to douse the flames.

Keep in mind this was nearly three weeks after Treasurer Jim Chalmers handed down the Budget — and after he introduced legislation into Parliament on Thursday to set up the first part of the changes.

Under Budget plans the 50 per cent discount on capital gains tax will be replaced with an inflation-based discount, with a 30 per cent minimum payable on the taxable portion starting from July 2027.

And negative gearing on investment properties will be limited to newly built homes, though anyone who used the tax break before May 12 will be allowed to keep it.

The changes are a direct contradiction of pre-election promises not to touch negative gearing or capital gains tax.

That broken promise provided the initial spark for the uproar which greeted the Budget plans.

But it seems almost daily a variety of sectors have identified problems, among them powerful business groups which raised concerns that higher capital gains taxes on businesses could hit investment.

On Thursday even WA Labor Premier Roger Cook went public to echo those fears.

And after consistent declarations by the Government about how the tax changes would encourage investment in new housing supply, a newspaper report on Friday said that Treasury secretary Jenny Wilkinson said they were less about tackling supply than about “changing the distribution of housing ownership”.

Ms Wilkinson — who also said much other work was being done to improve supply — reportedly added that while people may be sensitive to extra tax, “revenue needs to be raised from somewhere”.

In another development, modelling commissioned by the property industry claimed the tax changes would increase rents by $9 a week and reduce the construction of new homes by 9000 over the next four years.

Clearly many hurdles remain in front of the tax legislation.

While Labor has a landslide majority in the House of Representatives, the Government will need the support of the Greens in the Senate.

The Coalition and One Nation are opposed to the Budget tax policies and without the Greens, the Government would lack the numbers in the Senate.

The Greens have previously indicated a reluctance to pass the tax changes unless negative gearing and capital gains tax rules are retrospective.

On Friday Opposition Leader Angus Taylor backed calls from Nationals leader Matt Canavan for an early election to allow a vote on the changes.

That remains a most unlikely outcome. But the fact the Government has no mandate for the tax changes will keep the matter live.

And as for the need to raise revenue, there is an alternative. Spend less.

Responsibility for the editorial comment is taken by Editor-in-Chief Christopher Dore.