‘Everything on the table’: Calls for tax overhaul to go beyond stage 3 cuts

Negative gearing and tax breaks for asset owners should be scrapped to fund wholesale reductions in income tax rates, Labor luminary Bill Kelty says, as progressive independents and big business pressure the government to overhaul Australia’s tax system.

Before the crucial Dunkley byelection next month, the Coalition is arguing Labor cannot be trusted to avoid revisiting Shorten-era tax concession changes after Prime Minister Anthony Albanese reneged on his commitment to leave stage 3 income tax cuts unchanged.

Former ACTU boss Bill Kelty with former prime minister Paul Keating.Credit: Louise Kennerley

Treasurer Jim Chalmers said this week the government was not “contemplating or considering” changes to negative gearing, franking credits and the capital gains tax discount.

But Kelty, the former ACTU secretary who worked closely with Bob Hawke and Paul Keating on economic reform, argued the tax system needed to be transformed to avoid a generation of falling living standards and an unjust society for younger Australians.

Praising Labor’s stage 3 changes for the help they gave low- and middle-income earners, Kelty said some young people were paying an effective marginal tax rate of more than 50 per cent when factoring in university fees, GST and private health insurance.

The government should freeze university fee debts and shift towards taxing assets rather than income, Kelty urged, describing the existing settings as “grossly unfair” for younger people and risking a fracturing of Australia’s middle class based on whether a person owned a home.

Treasurer Jim Chalmers and Labor’s candidate in the Dunkley byelection, Jodie Belyea, on Wednesday.

“Is that what we say to half the workforce, half the society, half of the young people: ‘Well that’s OK, your problem is you didn’t have rich enough parents [to afford a home]’?” he said, adding that income tax rates in the high 30s and above were too high.

“I don’t think that’s a good society. I think it’s an awful society.”

By consistently siding with “rich older people”, whose numbers are dwindling, Kelty said the Liberal Party could be “destroyed” as a viable party of government.

Labor too risks further reductions in its near record-low primary vote as younger people drift to the increasingly economics-focused Greens or independents and right-wing minor parties, he said.

New Treasury data released on Wednesday showed the government would forego an estimated $26.8 billion in revenue due to negative gearing concessions by 2025-26, up by a billion dollars since last year’s estimate.

This is despite the total benefit accrued by taxpayers via rental deductions falling in the most recent year for which data is available, 2020-21, because landlords faced lower interest rates.

Tax exemptions on superannuation earnings remain the largest portion of lost government revenue, at about $56 billion in 2023-24.

Teal MP Allegra Spender used a National Press Club address on Wednesday to call for a new tax debate to go beyond the stage 3 tax cuts. She will release a detailed report in the middle of the year making policy recommendations.

“Everything has to be on the table in these discussions,” she said. “Capital gains tax and super tax concessions, stamp duty and land taxes, the GST, company tax thresholds, resource rent taxes, payroll taxes and fuel taxes, just to name a few.”

Allegra Spender at the National Press Club on Wednesday.Credit: Alex Ellinghausen

The Business Council of Australia also called for a national discussion about tax reform. The council’s chief executive, Bran Black, said without change Australia faced an economic cliff.

“We need to get moving on the all-important tax reform discussion or we will lose another decade,” he said.

Treasurer Jim Chalmers left the door open on broader tax reform, but pointed out there was already tax reform under way, including changes to superannuation tax concessions, multinational tax reform and the stage 3 tax changes announced last week.

“We’ve got a broad and ambitious tax reform agenda under way. We need to legislate that, and in the interim we welcome the suggestions that are made to us in good faith,” he said.

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