Australians have been assured there will be no tinkering with tax breaks for real estate investors following an unexpected rework of the stage three cuts.
With the federal government gearing up to take its rejigged tax package on a national roadshow, the treasurer has been under pressure to confirm there will be no more tax policy about-turns.
Jim Chalmers said there was no plan to reheat Labor’s 2019 election platform and change negative gearing or other tax breaks for real estate investors.
“We’ve made it really clear that’s not something we have considered or are considering,” Dr Chalmers told reporters in Canberra on Monday.
Yet when pushed on the effectiveness of the existing tax settings for those looking to get into the housing market for the first time, he acknowledged a “need to do better”.
He said the government had found other ways to take pressure off the strained housing market, including incentives for more build-to-rent properties and bolstering commonwealth rent assistance.
Liberal frontbencher Dan Tehan wanted Labor to categorically rule out changes to negative gearing. He criticised the government for breaking faith with the public after going to the election with a different position on stage three tax cuts.
“When you say your word is your bond and you go back on that and you won’t even apologise for it, the Australian people are going to view that very dimly,” he told Sky News.
Under the tweaked stage three scheme, tax relief has been redistributed so benefits are skewed toward lower and middle income earners while those on the highest incomes will receive less than under the original design.
The changes will need to be legislated, with the prime minister hopeful members of the Greens and independents will back policy changes when parliament resumes in February.
Tasmanian senator Jacqui Lambie will support Labor’s new cuts in their current form, with the Greens set to push for greater support for lower-income earners and a higher tax-free threshold.
“We don’t think it is right that Labor is asking middle income earners to be satisfied with an extra $15 a week, when rents on average under Labor have gone up by about $100 and mortgage payments by $200,” Greens leader Adam Bandt told ABC TV on Monday,
The tax cuts are due to start flowing through from July 1, amounting to extra money in pockets at a time when inflation is still expected to be above the Reserve Bank’s two-three per cent target range.
Commonwealth Bank head of Australian economics Gareth Aird said revising the cuts had shifted their distribution, with the size of the package largely unchanged.
He said there was an argument that a greater share of the relief would be spent now that more was flowing to lower and middle income earners.
“But the overall changes are not enough to shift the dial for economic growth, the labour market or inflation,” Mr Aird wrote in a note.
The economist said the tax cuts were not of sufficient size to fend off interest rate cuts later in the year.
“The RBA board is unlikely to wait to assess the impact of tax cuts on the economy if the already-released data suggests the case for maintaining a restrictive monetary policy setting is no longer necessary or appropriate.”
He said the tax cuts risked a shorter easing cycle into 2025, rather than a delay to cuts starting in September based on CBA’s best guess.
Andrew Brown, Dominic Giannini and Poppy Johnston
(Australian Associated Press)