Labor is readying for a bruising fight with property investors and wealthier Australians as it begins making the case for major tax reforms, including a crackdown on property investments.
Jim Chalmers’ fifth federal budget as treasurer attempts to rebalance the nation’s tax system, paring back investment property tax concessions and giving all workers an annual $250 sweetener from 2027.
The opposition has declared it will not support the package of changes, accusing the government of breaking its election promise not to touch negative gearing and the capital gains tax discount.
Dr Chalmers conceded the property tax changes would be controversial but argued they were worthwhile because they would help about 75,000 people into the housing market.
“I’m expecting a big campaign. There’ll be the usual scare campaign,” he told AAP.
“Whenever a government like ours attempts to improve the tax system it elicits strong views from people who would prefer the status quo to endure.”
As part of the budget, negative gearing – where a landlord can deduct losses on a rental property against their wages at tax time – will be limited to newly built homes from July 2027, with an exemption for properties bought before the announcement.
The 50 per cent discount on capital gains tax will also be overhauled, with the measure on existing properties to be linked to the current rate of inflation from July 2027, and a minimum tax rate of 30 per cent to be imposed.
Gains on properties built before 1985 – which have previously been exempt from CGT – will also begin being taxed from July 2027 at the inflation-adjusted rate.
A 30 per cent minimum tax will also be imposed in discretionary trusts, which are often used by wealthy families to split income between family members and minimise tax.
Together, the changes to investment taxes will rake in an extra $8 billion, to be spent on the new offset for all workers and further relief for businesses and startups.
Master Builders Australia accused the government of deploying a “sleight of hand”, warning the changes would reduce housing supply and cause the government to miss its targets for new dwellings.
“While they have put up a sleight of hand to say there is a focus on new homes, the reality is that you are creating a tax hike, which means people vacate the property investment market,” chief executive Denita Wawn told AAP.
“We know from our modelling that we will see a reduction in supply.”
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