‘Not working for young people’: Chalmers flags huge tax changes in Federal budget

Treasurer Jim Chalmers has hinted at “difficult but necessary” tax reforms in Tuesday’s budget while stopping short of confirming changes to negative gearing.

In an appearance of Sky News’ Sunday Agenda, Mr Chalmers stopped short of confirming any tax changes, but said he was aware of the speculation.

“When it comes to the tax package in the budget, it will have some difficult but necessary reforms,” he said.

“It is overwhelmingly not about collecting heaps more revenue over the budget period, it is about more reforms.”

Mr Chalmers said the current budget was not doing enough to recognise the efforts of workers when compared to those who earn their revenue through investments.

Mr Chalmers stopped short of confirming whether or not there would be changes to negative gearing and capital gains tax (CGT) exemptions.

“The challenges with our housing market begin with supply but they do not end there,” he said.

“The status quo in housing and in tax is unfair and unacceptable. A responsible government like ours will respond to that.”

In the weeks leading up to Tuesday’s budget, two major reforms for property investors have been spruiked including changes to negative gearing and scrapping CGT discounts altogether.

The first will be changes to negative gearing which is expenses associated with a property such as interest or repairs which can reduce taxes paid if it is greater than the profit the investor made.

Property investors who already negatively gear their properties in Australia won’t be affected by new budget changes, meaning about one million current landlords will keep their existing tax breaks.

For new Australians who want to take advantage of negative gearing, they will have buy a newly built home, which the government hopes will help boost supply.

The government will also make changes for capital gains tax discount, which will impact every single investor.

These changes will return capital gains tax in Australia to the pre-1999 discount, with investors’ savings being equal to inflation.

This moves Australia back to where it was before the Howard government who removed indexing in favour of a simplified 50 per cent discount on all properties held for at least 12 months.

The Treasurer says so far the focus has been on supply but there needs to be more done to get young Australians into the housing market.

“My goal at the election was to build more homes and we are doing that,” he said.

“The best way to understand the 12 months since the election: the first year was about a year of delivery, while the budget on Tuesday night will signal a year of more ambitious reform.”

“It recognises the status quo on housing and tax is broken, it is unfair, it is unacceptable.”

Shouldn’t expect ... big near term cash splashes

The Treasurer also flagged small tax changes for households, but pointed out his government will be “responsible” over giving away cash splashes for households.

In recent days there has been speculation about an “earned income offset” – between $200 to $300 for every Australian taxpayer.

“Be careful with those kind of assumptions, people shouldn’t expect in a very tight and responsible budget defined by spending restraint, they shouldn’t expect there to be big near term cash splashes in the budget because we take this inflation challenge seriously,” he said.

“On taxes, we are already cutting income taxes with another coming on July 1 and another the year after.”

“We are funding the petrol tax cuts and we have an instant deduction that provides a bit more tax relief so we are already doing that.”

Mr Chalmers previously told news.com.au the CGT changes would level up the playing field, not punish baby boomer investors.

“We’re not trying to punish anybody who has made decisions about how they’ve used the tax system or the housing market in the past,’’ the Treasurer said.

“It’s about trying to expand opportunities in the housing market for more people.”

“Our motivation in considering some of these changes is recognising that helping people get a toehold in the housing market is a really important way of helping people get a toehold in the economy more broadly.”

Liberal senator Jane Hume also appeared on Sunday Agenda where she questioned why the government changed its mind about the tax changes and how it will lift housing supply.

“If it is not going to have a significant effect on housing supply it is a tax grab – a tax grab from a cash strapped Labor government that has overspent,” she said.