Jim Chalmers rejects ‘ambition tax’ claims as Labor defends capital gains tax changes

Treasurer Jim Chalmers has rejected claims Labor’s capital gains tax reforms amount to an “ambition tax”, insisting the Government is making the tax system fairer rather than punishing Australians for trying to build wealth.

Facing sustained questioning on Sunrise on Tuesday morning, Dr Chalmers defended the controversial changes after young investors and critics argued the reforms would discourage investment and leave Australia less competitive than countries such as New Zealand and Singapore.

“Well, I reject both of those assertions,” he said.

“But I understand that when you’re making difficult tax reforms, ambitious tax reforms, which are all about cutting taxes for workers and making things fairer for first home buyers, there won’t be unanimous support for that.”

“It’s always the case in this country, when you’re engaged in difficult economic reform, and particularly tax reform, that it will be contested, there will be people who campaign against that, and that’s what we’re seeing now, and that’s fine.”

Host Natalie Barr questioned whether Australia risked driving investors offshore, noting that New Zealand and Singapore do not levy capital gains tax on many property and share sales.

Dr Chalmers dismissed the comparison, arguing those countries had operated under different tax systems for years without triggering a mass exodus of Australian investors.

“The reason why they won’t do that ... is because there’s already been a difference. New Zealanders have had zero for some time, and Australia’s had the 50 per cent discount for some time, and before that indexation, and we didn’t see those kinds of outcomes.”

Instead, the Treasurer said Labor’s reforms were aimed at correcting what he described as a long-standing distortion in Australia’s housing market.

“The big overcompensating has been for established housing,” he said.

“This is the main reason we’re making this change is because, for too long, our house prices have far outstripped income growth.”

Dr Chalmers also revealed Treasury’s analysis found some investments had actually received less favourable treatment than others under the current capital gains tax settings.

“In some cases, we think that investments have been undercompensated,” he said.

Pressed repeatedly on which investors would be better off under the new rules, he pointed to Treasury modelling spanning two decades.

“If you look at that 20-year period that we analysed, some kinds of share investments, for example, were undercompensated,” he said.

“There was also a big difference between investing in medium-density property and the regions versus detached housing in the major capital cities.”

“So there’s been a big distortion in the tax system. We’re addressing that.”

Dr Chalmers insisted the changes would still leave a capital gains tax discount in place, but one calculated differently to create what he described as a more neutral tax system.

“There is still a discount after these changes come in. It’s just calculated differently,” he said.

“That’s designed to better align the tax treatment of people who earn wages and salaries versus people who earn their income, legitimately, from assets.”

The Treasurer also used the interview to highlight a raft of cost-of-living measures taking effect from July 1, including another round of income tax cuts, higher award wages, superannuation being paid on payday, an extension of paid parental leave and fuel tax relief.

“Tomorrow, we will deliver another tax cut, will deliver higher wages, an extension of paid parental leave, will pay super on payday, and will extend the petrol tax relief, as well,” he said.

Questioned about forecasts suggesting Sydney and Melbourne house prices could fall under Labor’s reforms, Dr Chalmers denied the Government was trying to engineer a decline in property values.

He acknowledged there had been recent softness in Australia’s two largest housing markets but argued the broader national market remained resilient.

“Our forecasts are for house prices to continue to grow a bit more slowly,” he said.

“There has been softness in those two big markets ... but nationally in aggregate, prices are continuing to grow.”

Dr Chalmers said Labor’s objective was not to drive down home values but to improve affordability by slowing price growth and giving first-home buyers a better chance to compete.

“Our objective here is to provide, make sure that there are more affordable options for those first home buyers to get a toehold in a market which has been too difficult for too long,” he said.