Treasurer responds after budget attack by ex-RBA head
The treasurer responded to the former Central Bank governor’s attacks on budget tax changes after the controversial laws were passed by parliament.
Former RBA governor Philip Lowe said changes to limit negative gearing and capital gains tax relief would not increase housing supply levels as the government had signaled.
“Extending changes to capital gains tax to risk-bearing assets is a mistake,” he said in a presentation on Thursday.
“I am disappointed that the government has extended the application of capital gains tax to non-residential assets and I think it would be to our detriment if they did so.
“We don’t have a growth agenda; we now have a redistribution agenda.”
The tax changes were passed by parliament on Thursday following a deal the federal government reached with the Greens.
At the last minute, the government confirmed it would change tax laws to remove the “widow tax”, under which people who own an investment property with their partner will lose their grandfathered tax relief if their partner dies or divorces.
But Finance Minister Jim Chalmers said the former RBA governor’s comments contradicted the reasons for the reforms.
“I don’t share his view. He has the right to express it, but I don’t share his view,” he told reporters in Canberra on Friday.
“When it comes to the substance of his comments, we are correcting a very harmful distortion in our tax system that has existed for a quarter of a century, leaving too many people, especially young people, without housing.”
“We’re trying to encourage investments to be made for economic reasons, not for tax benefits, and so I have a different view on the substance of what Phil Lowe said, but obviously he has the right to express his view.”
Capital gains tax settings will change from July 2027; The standard 50 percent deduction will be replaced by cost-based indexation and a minimum tax rate of 30 percent.
The changes will be extended to all entities, including businesses, but the government has announced a regulation to appease the startup sector, which has complained it will be uniquely affected by the new regulations.
Prime Minister Anthony Albanese said the changes were necessary despite resistance from business groups.
“If everyone has identified the problem and agrees the system is broken, then you can’t just sit back and do nothing about it,” he told Seven’s Sunrise programme.
“What we are doing is putting forward modest, sensible legislation that protects existing adversely affected properties.”
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