Chalmers to unveil property tax changes, NDIS cuts and business incentives
Finance Minister Jim Chalmers will break election promises as he plans the biggest change to property taxes this century, deep cuts to the NDIS and plans to provide affordable housing to young Australians, unveiling measures aimed at reducing operating costs in the budget on Tuesday.
Given the inflation pressures the country faces, which has forced the Federal Reserve to raise interest rates at its last three meetings, Chalmers will promise a $45 billion improvement in the country’s finances with every dollar of extra tax revenue saved.
The budget is shaping up to be the most significant since Joe Hockey’s infamous 2014 fiscal plan; Chalmers promises to address “intergenerational equality” in most areas of government policy.
The focus will be on tax reform and extra spending on housing; There will be the restriction of negative regulations, the return of the capital gains tax privilege to its original form and the minimum tax rates applied to family foundations. It will also include a tax cut for salaried employees, which will likely be paid as a tax offset for the 2027-28 financial year.
Before last year’s election, Prime Minister Anthony Albanese repeatedly said the government would not shift into negative gear; critics claimed that this, combined with the CGT concession, put upward pressure on Australian property prices, which are among the highest in the world.
Albanese effectively confirmed on Monday that property tax settings would change, saying the government could not afford to stand alone as more young people could not afford to own a home.
He said the government needed to take action given people were increasingly frustrated with the unstable housing market.
“For a long time, young people tried to save money for a house. Another year has passed since the election and not enough has changed,” he told ABC Radio.
“Many people have spent another year missing auctions, renting and paying off someone else’s mortgage. And many young people are about to give up the opportunity to own their own home.”
Albanese told a party meeting on Monday that “a responsible government must be prepared to make difficult decisions”.
Any changes to property taxes will be objected to by the Coalition; Farrer is still reeling from the disastrous result in the by-election, where the Liberal-Nationals’ total vote was just 21 per cent.
Shadow treasurer Tim Wilson accused the government of “deception and betrayal” in the expected changes and said it would harm the people he said it was trying to help.
“It’s abundantly clear that this government’s intention is to hit every single Australian, to exploit their wealth because they can’t control their spending addiction,” he said.
“This government’s budget process is in complete disarray because they have broken their promises and Australians have realized the fraud at the heart of this government and its budget.”
In another sign of how critical housing is to the budget, almost $60 million will be available over the next four years to provide housing for young people on Youth Allowance or Austudy.
The money will go to social housing providers to provide homes for 2,325 people this financial year, rising to 4,355 people by 2029-30.
The coalition has warned that changes to CGT and negative gearing will hurt property investors. However, research by UBS analysts published on Monday suggested that the reforms would make share purchases more attractive and reduce the pressure on property prices.
Strategists Richard Schellbach and Lily Huang said changes to negative gearing would “level the playing field” against other types of investment, noting that current tax regulations put upward pressure on real estate prices.
“The decades-long rise in house prices in Australia has been helped by favorable tax treatments, particularly unfavorable treatments for investment properties,” they said.
Chalmers, which ran a budget surplus in 2022 and 2023, will reveal a series of deficits over the next four years.
But through extra revenue, $64 billion in spending cuts and reprioritization of existing spending, fueled in part by the war against Iran, Chalmers will announce a $44.9 billion improvement in the country’s finances between 2025-26 and 2029-30.
During this period, the government estimated that the total deficit would be more than $180 billion.
Chalmers, who is expected to confirm that gross debt will exceed $1 trillion later this year, said a number of factors enabled the budget to achieve better profitability.
“We’ve made a huge improvement in the budget since we were elected, and we’ve made another improvement since the last update in December,” he said.
“What has driven this improvement in the budget is the savings we have found and the spending restraint we have demonstrated.”
The outcome of the war against Iran remains an important factor of change. Brent crude oil prices rose almost 5 percent to $105 a barrel on Monday as hopes for a solution to the war faded.
The budget will announce that inflation will likely reach 5 percent by the middle of this year, partly due to the rise in oil prices, while economic growth, which was estimated at 2.25 percent in the mid-year update, is expected to be reduced.
However, if oil prices remain high for the rest of the year, the economic downside is expected to be even worse, including longer periods of high inflation and slower employment growth.
The biggest cut over the next four years will be to the NDIS, saving $35 billion, and $3 billion will be saved by removing the Private Health Insurance discount for people over 65.
Some of the savings will be needed for extra spending, including $25 billion for public hospitals and $6 billion for new Drug Assistance Program lists.
Chalmers will announce an efficiency package aimed at increasing the economy’s growth rate without increasing inflationary pressures. It would include a range of measures, including a permanent $20,000 immediate write-off of assets for small businesses, reducing fees charged to construction and security firms, and expediting construction approvals.
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Shane Wright is senior economic correspondent for The Sydney Morning Herald and The Age.Connect with: X or email.
