Majority of Young Australians to Benefit from Labor’s Tax Reforms, Treasury Says
The Albanese government’s proposed tax reforms, including a $1,000 tax deduction, a $250 ‘working Australians tax offset’ (WATO), and changes to capital gains tax (CGT) and negative gearing, are projected to benefit 90% of young Australians, according to Treasury modelling.
The government introduced these tax changes to parliament on Thursday, preceding a contentious question time where opposition leader Angus Taylor referred to Prime Minister Anthony Albanese as an “arrogant prick,” and the Nationals called for an early election.
Treasury Secretary Shares Modelling at Economists Lunch
Earlier on Thursday, Treasury Secretary Jenny Wilkinson presented previously unreleased modelling at an Australian Economists lunch in Sydney. Wilkinson stated that the combined impact of the automatic $1,000 tax deduction, the $250 WATO, and the CGT and negative gearing reforms would benefit most young people.
“The cumulative impact of the reforms is assessed as benefiting around 90% of young people, before impacts in the housing market are taken into account,” Wilkinson said.
She further noted that had these changes been implemented decades ago, those under 30 today would be in a better financial position.
“Around 90% of Australians would have been better off by age 30 had the proposed changes been in place from 2000, with the benefits of the WATO and instant deduction outweighing the impact of the savings tax changes,” Wilkinson explained.
The modelling evaluated Australians based on their total lifetime income. It indicated that individuals in the top 10% of lifetime earnings would have been worse off by age 30 under the new reforms compared to the previous system.
Demographic Trends in Property Investment and Share Ownership
Reserve Bank research released on Thursday revealed that people under 40 comprised 35% of property investors in 2000, a figure which declined to approximately 20% by 2023. Conversely, investors over 60 increased from 12% in 2000 to 28% in 2023.
Tax office data shows that about 10% of Australians under 35 own shares.
Critics have argued that some individuals with significant share market investments, including young people, may face higher taxes under the reforms.
Wilkinson acknowledged these concerns but emphasized that such investors would still benefit from their post-tax profits.
“This reflects the unavoidable trade-offs involved in system-wide reform,” she said.
Addressing Productivity and Tax Design Concerns
Wilkinson also addressed claims that the new tax settings could negatively affect productivity, stating there is no conclusive evidence to support such assertions. She rejected proposals to limit reforms solely to housing, excluding other asset classes.
“OECD research suggests there is not clear evidence to support favourable treatment of capital gains to promote investment, beyond compensating for inflation,” she said.
“Applying the new arrangements to income across all assets is important from a tax-design perspective to avoid introducing a significant new distortion into the tax system.”
Internal Labor Debate Over CGT Carveouts for Businesses
Within Labor, there is tension regarding whether to provide CGT exemptions for small or early-stage businesses, following significant backlash from employers and entrepreneurs concerned about the reforms’ impact on business.
Treasurer Jim Chalmers appears inclined to maintain his budget proposal without substantial changes, though some Labor MPs are increasingly advocating for scaling back the CGT changes to lessen their effect on businesses.
The government’s CGT reforms will undergo scrutiny in a short Senate inquiry, with a report due by 22 June. Labor aims to pass the initial budget bills into law before parliament adjourns for its winter break in early July.
Prime Minister Albanese on Ongoing Consultations and Tax Integrity
In an interview with the ABC, Prime Minister Albanese stated that consultations with business groups are ongoing and did not rule out potential adjustments, but emphasized the abundance of existing tax concessions and benefits available to small businesses.
“We get people will put forward ideas, but the fundamentals will stay there, the integrity of the system will stay there, and what we don’t want to do is to shut down some loopholes and create others,” he said.
Opposition and Nationals Demand Election Amid Polling Challenges
Nationals leader Matt Canavan called on Albanese to call an election to secure a mandate for the proposed tax changes, despite polling indicating the Nationals could be nearly eliminated if an election were held now.
A recent poll by Redbridge Group and Accent Research projected the Coalition could fall from 43 lower house seats to 12, with One Nation surging to 53 seats and Labor retaining government with 76 seats. The poll suggests the Nationals could be wiped out in the lower house.
Contentious Day in Federal Parliament
During a tense day in federal parliament, Coalition MPs accused Labor of dishonesty regarding tax. Angus Taylor attempted unsuccessfully to suspend question time to initiate a debate against Labor’s plan. He also insulted Albanese, calling him an “arrogant prick,” a comment confirmed by Taylor’s office and Labor sources.
When questioned about the remark on the ABC, Albanese declined to repeat it but stated that “swearing across the chamber isn’t appropriate.”
