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Anthony Albanese’s emphatic federal election victory has delivered the biggest tax shake-up in a generation.
No matter your opinion about the merits of the government’s planned changes to negative gearing and capital gains tax (plus the Working Australians Tax Offset and $1000 standard deduction), the political magnitude of what will pass the Senate this week is difficult to ignore.
You might not recognise it because it’s been so long since a broad range of tax changes, in a single package, have been announced, debated and pushed through the parliament.
Since World War II, there are only three that really surpass it.
Paul Keating’s 1985 package, which cut company and personal tax rates while putting in place the capital gains and fringe benefits taxes, was the first and the biggest.
John Howard and Peter Costello delivered two: the original GST in 1999 (with its deep cut to personal tax rates in return for the 10 per cent goods and services tax), and the Ralph review-inspired cut to company tax and the 50 per cent CGT concession in 2000 and 2001.
These three packages delivered enduring improvements to the tax system. The economy and federal budget were made better off because of them.
There have been missteps, failures and tax cuts masquerading as “reform” since the turn of the century.
The Gillard government put in place the carbon tax and the minerals resource rent tax. Neither survived the Abbott government.
Tony Abbott and Joe Hockey’s 2014 budget promised the biggest fiscal overhaul since the 1970s. Instead, it ended Abbott’s prime ministership. Hockey was gone from parliament within 17 months.
Scott Morrison did begin his seven-year, three-stage cut to personal income taxes (which were then modified by Albanese in early 2024). But simply cutting a tax is not reform.
The aim of reform is to improve the tax system with a policy objective in mind. In the case of the package that Jim Chalmers and Albanese pulled together, the aim has been clear – rebalance the housing market.
Anyone who believes the housing market is operating well is either delusional or so heavily invested in ever-increasing property prices that they’ve lost touch with the reality facing young people.
The concerns about current property tax settings are well established. The Treasury and the Reserve Bank noted the impact of negative gearing and its interaction with the capital gains tax concession in the early 2000s.
But with real tax reform, there are losers. Listen hard enough and you can still hear the sozzled complaints from the restaurant owners of 1985 who said the fringe benefits tax would end the days of liquid lunches.
We’ve heard plenty from the losers since the government’s changes, who are on the wrong end of a decade-long tax increase of around $77 billion.
Critics have argued the reforms, particularly those around CGT, will end “aspiration” and cripple productivity, as if the Australian economy has been riding a productivity wave for the past 25 years under current tax settings.
Their criticisms will be given a real-world test as the tax changes are put in place.
The other test will be for Albanese.
The government’s primary support in all key opinion polls is down on what was achieved at last year’s election. The collapse in Coalition support, and the increase in voters backing One Nation, has obscured the amount of political skin lost by Albanese over the past three months.
And both One Nation and the Coalition have been delivered potent political attack lines by Albanese’s actions.
No matter how Albanese or Chalmers characterise their actions, the package of reform is brimful of broken promises. When Angus Taylor or Pauline Hanson tell voters they can’t trust the word of Anthony Albanese, they only have to point at the 2026 budget for proof.
There’s also been terrible haste in the way the total package has been pulled together. The carve-outs for start-ups, the threshold change for small businesses and even the concession to the Greens on residential borrowing through self-managed super funds should have been sorted out before the legislation was pushed into the parliament.
That suggests there will be unintended consequences of this tax package. There are always unforeseen impacts from tax reform.
To this day, Howard’s deal with the Democrats to win support for the goods and services tax is the reason you can buy cheese-and-bacon rolls at the local supermarket (GST-free) but not a pizza-topped bun (which attracts the tax).
The CGT concession of 1999 was supposed to super-charge the sharemarket. Instead, it became a flame to mothlike property investors.
That means the work for Albanese and Chalmers, who face more tax arguments around trusts plus a pre-election personal income tax cut, is not yet finished.
But without that enormous victory on a Saturday evening in May last year, none of this work would have ever started.
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Shane Wright is a senior economics correspondent for The Sydney Morning Herald and The Age.Connect via X or email.From our partners
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