New Treasury modelling shows that 90% of young Australians would be better off under the Albanese government's proposed tax reforms, which include a $1,000 automatic tax deduction, a $250 'working Australians tax offset' (Wato), and changes to capital gains tax (CGT) and negative gearing. Treasury secretary Jenny Wilkinson presented the previously unreleased data at an Australian Business Economists lunch in Sydney on Thursday.
Wilkinson said the cumulative impact of the reforms would benefit around 90% of young people before considering housing market effects. She added that had the changes been in place since 2000, approximately 90% of Australians would have been better off by age 30, with the Wato and instant deduction outweighing the impact of savings tax changes. However, those in the top 10% of lifetime earnings would have been worse off by age 30 under the new system.
The modelling comes as the government introduced the tax changes to parliament amid heated debate. Opposition leader Angus Taylor called Prime Minister Anthony Albanese an 'arrogant prick' during question time, while the Nationals leader Matt Canavan demanded an early election. A recent poll suggests the Coalition could be reduced to just 12 lower house seats if an election were held now.
Reserve Bank research shows that property investors under 40 fell from 35% in 2000 to about 20% in 2023, while those over 60 rose from 12% to 28%. Critics argue some young people with significant share market investments may pay more tax, but Wilkinson acknowledged trade-offs and said post-tax profits would still be enjoyed. She also dismissed claims that the reforms could worsen productivity, citing OECD research that found no clear evidence supporting favourable CGT treatment to promote investment.
Internal tensions within Labor persist over whether to provide CGT carveouts for small or early-stage businesses, following backlash from employers and entrepreneurs. Treasurer Jim Chalmers appears reluctant to substantially alter the budget proposal, but some Labor MPs want to reduce the CGT changes' effect on businesses. The government's CGT changes will be scrutinised by a short Senate inquiry, reporting by 22 June, with Labor aiming to pass the first budget bills before parliament's winter break in early July.
