22/06/2026
Monday Money Talk with Noel Whittaker
Almost a month has passed since Budget night, and criticism continues to mount. Hardly a day goes by without someone uncovering another problem buried in the Budget papers. Worse still, much of the proposed legislation is so vaguely drafted that even tax experts say they are waiting for further details before giving advice.
I was originally going to start with the biblical quote, "Forgive them, Lord, for they know not what they do." But the more I dig into the Budget detail, the less appropriate that seems. The quote that now comes to mind is Sir Walter Scott's warning: "Oh, what a tangled web we weave, when first we practise to deceive." The government's determination to rush the legislation through Parliament before proper scrutiny only adds to the concern.
Labor keeps presenting these measures as a solution to intergenerational inequality and a way to make housing more affordable for first-home buyers. That's nonsense. There are only three ways to improve affordability: reduce interest rates, cut personal income tax, or allow house prices to fall. The first two are off the table. And while softer prices should help buyers, they spell trouble for young people who recently purchased with deposits as low as 5%.
The attack on negative gearing has already driven many investors from the market, leaving first home buyers competing for a shrinking pool of properties. The predictable results are emerging: tighter rental markets and higher rents. And what connection can there possibly be between housing affordability and higher taxes on small business, testamentary trusts and capital gains? The changes look less like housing policy and more like a revenue grab.
The broader pattern is troubling. Labor took four key tax targets to the 2019 election – the capital gains tax discount, negative gearing, family trusts and franking credits – and voters overwhelmingly rejected them. This time, the measures are being introduced early in the parliamentary term, long before voters can pass judgement. The surge in support for One Nation may suggest many Australians are already unhappy with this new direction.
Consider franking credits. Accountants tell me many business owners are already restructuring, increasingly preferring family companies over family trusts. If that trend continues, will franking credits become the next target? Dismissing the idea because "they would never do that" is hardly persuasive; similar assurances were given about several measures now on the table.
Treasurer Chalmers claims the extra revenue raised by these measures will fund an automatic $1,000 tax deduction for ordinary Australians. Get real, Jim. A $1,000 deduction is worth only about $300 to a worker on average earnings. The $250 Working Australians Tax Offset is of no benefit to people with no taxable income. Together they are worth only about $11 a week to the average worker, while the major tax measures are expected to raise about $77 billion. If correct, that would be the biggest tax grab in Australian history. Yet there is barely a mention of some of the most disadvantaged people in our society: single pensioners who rent and who are heavily penalised if they try to supplement their income through part-time work.
Then there are the misleading comparisons. The government claims replacing the capital gains tax discount with indexation simply returns us to the Paul Keating model introduced in 1985. But it omits averaging, which prevented one-off gains from pushing taxpayers into higher tax brackets. If you earn $125,000 and make a $50,000 capital gain, under the Keating system, averaging would tax the gain at 30%. Under the proposed model, most of it is taxed at 37%. That's not a return to the Keating model. It's a selective version that keeps the revenue-raising features and drops the taxpayer protections.
The government has even invented a new term: the "minimum tax gap". This is the amount of extra tax you must pay if the tax generated by your capital gain falls short of 30% of the gain. To work it out, the legislation requires diabolical calculations. First, there’s a seven-step process to calculate your minimum taxable capital gain. Then another seven-step process to calculate your minimum tax gap. That's 14 separate steps before you even know how much tax you owe. You couldn't make this stuff up. And if it’s bad for housing, as far as shares are concerned, the complications are mind-boggling.
Case study: Ted and Mavis, both aged 75, have $700,000 in super and a parcel of shares owned by Ted, purchased five years ago for $60,000. They receive a part age pension. Ted dies on 30 June 2027 and leaves everything to Mavis. As a result, she loses her age pension because her assets exceed the relevant threshold. At Ted's death, the shares are worth $100,000. Two years later, Mavis sells them for $120,000 to help fund travel and home renovations.
Under the old CGT rules, the $60,000 gain would have been reduced to $30,000 after the 50% discount, resulting in no tax. Under the proposed rules, Mavis can elect a market value cost base of $100,000 at 1 July 2027. Assuming 5% indexation, the cost base becomes $105,000. Selling for $120,000 produces a post-2027 gain of $15,000, attracting a minimum tax of $4,500 unless she qualifies for at least a part age pension. If she receives even one dollar of pension, SATO could eliminate the tax entirely. That is a tax difference of $4,500 on a gain of just $15,000 for an elderly widow. And yet a worker would need to earn more than $227,000 before their average tax rate exceeded 30%. How is that a fairer tax system?
It's difficult to avoid the conclusion that these Budget measures were rushed, poorly thought through and drafted without proper consideration of their real-world consequences. As more details emerge, the list of anomalies continues to grow. The question is whether the government is prepared to listen before the damage becomes permanent.
