Why is the Labor Party using its majority for tax reform?

Analysis

The topic is tax

Monday, 1 June 2026, at 5:00 am

Is this tax reform what Anthony Albanese and Jim Chalmers want to focus on?

Two questions are being asked about the federal budget

Why is Labor using its majority for a small change to capital gains tax on businesses?

Will housing become more affordable and a bad investment?

For the first time, there is hope that housing affordability will improve

But there is a negative side to this

Many young families who bought houses with debt will be affected

They may lose the value of their homes and struggle with debt

This especially applies to those who used the government's 5% deposit offer

The loss of housing affordability has been a disaster for many people

The government must choose between helping those who own homes and those who don't

The government is focused on tax reform

Why did the Albanese government decide to use its majority for this tax reform?

The principle of not distorting investment decisions is sound, but there are bigger issues

The 50% CGT discount was introduced to help business, but it didn't work

It led to a surge in house prices and made housing unaffordable

Now the government wants to make sure investment is not distorted towards business

The government has decided to set a minimum tax rate for capital gains

This means low-income earners will pay more tax on capital gains than on their wages

Is this really the tax reform the government wants to focus on?

The government has the support of economists, but it's becoming a political issue

The budget deficit

The tax reform won't make a big difference to the budget deficit

The amounts of money involved are not significant

The government's budget plans include $1.35 billion in 2028-29 and $2.28 billion in 2029-30

This is not a lot of money, and it won't happen quickly

The government doesn't know how much of the money will come from negative gearing and CGT

Most of the money will probably come from negative gearing and business paying more CGT

The inflation adjustment for CGT is hard to predict

The government thinks its efforts to make housing more affordable will work

Any money from CGT will probably come from business, not housing

It's hard to believe the government isn't doing more ambitious tax reform

Previous Labor governments have done more with less

The government has a majority and a mandate

What should the government be doing instead?

The loss of housing affordability has been a disaster

One suggested reform is to shift away from income taxes and towards consumption and resources taxes

The top marginal income tax rate is not the problem, but the salary at which it starts is

Australia's consumption tax is low compared to other countries

Economists argue that the GST rate should be increased

The proceeds could be used to lower income taxes

The federal government could take over health spending and use the GST revenue for this

This would bring primary care and hospital funding under one roof

It would also end the argument about who takes care of certain services

This would be a worthwhile tax reform

Labor's capital gains tax changes have caused debate

As for housing, making it a poor investment was necessary

The government's path forward is to deliver on housing and wages

At least, the reform to make housing more affordable is working

A research note from Macquarie Group said there will be little to no real price growth in housing

Immigration is falling, and housing starts are rising

This should result in a surplus of housing for a while

House prices are already falling in Melbourne and Sydney

The increase in CGT and removal of negative gearing will accelerate this

At best, house prices will stay roughly the same for a long time

The good news is that this will make housing more affordable

The bad news is that it will be a terrible investment

Alan Kohler is a finance presenter and columnist

Monday, 1 June 2026, at 5:00 am

Monday, 1 June 2026, at 9:08 am

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