Business Council Warns Labor to Cut Spending Before Implementing New Tax Scheme

The Business Council of Australia says the country already falls behind in terms of investment competitiveness.

Australia's Prime Minister Anthony Albanese holds a press conference with New Zealand's Prime Minister Christopher Luxon following the annual AustraliaNew Zealand Leaders' Meeting in Noosa in Queensland, Australia on June 6, 2026. Patrick Hamilton/AFP via Getty Images

The government should look to its spending before increasing taxes, business groups have told the Senate Economic Committee, which is scrutinising Labor’s overhaul of wealth creation vehicles.

The Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026 alters the capital gains tax (CGT) regime, which applies to the profit of an asset sale. Previously a 50 percent discount was available, meaning an investor was liable for a tax on the remaining half of the profit.

That has now been replaced with a 30 percent minimum tax on the full profit earned, as well as inflation-adjusted gains.

Further, the Labor government has moved to discourage the use of discretionary trusts by imposing a 30 percent tax on all income placed in one—trusts are a popular vehicle for business owners to reduce their tax burden via income splitting.

“This is a very large new tax, raising more than $40 billion over 10 years, a significant amount of which will impact on investment in business,” said Bran Black, chief executive of the Business Council of Australia.

“[This] huge increase in revenue is designed to play catch-up with blowouts in government spending, which is moving to a historic high of 26.8 percent of GDP.

Black said increasing revenue would only mean “locking in” government spending.

Bran Black, chief executive of the Business Council of Australia, gives evidence to the Senate Economic Committee in Canberra, Australia on June 15, 2026. (Screenshot of parliamentary proceedings).

“The growing transfer of resources from the high-productivity private sector to the low-productivity public sector will act as a drag on the economy,” he said.

Businesses with the highest productivity that generate the highest capital gains would be taxed the most, he pointed out.

The changes would also affect Australia’s competitiveness, which is already poorly rated on tax.

“We know from OECD analysis that we are already an uncompetitive jurisdiction,” Black said. “We release a report, which we call our Global Investment Competitiveness Index. We measure Australia’s performance against 41 other economies. We rank 21 out of 42 on all of the seven settings when you combine them, but on tax, we rank 38th out of 42. We are already behind the eight ball when it comes to investment attraction.

“We are close to 30 year lows with respect to business investment.”

Australian Treasurer Jim Chalmers addresses the National Press Club in The Great Hall in Canberra, Australia on May 13, 2026. Hilary Wardhaugh/Getty Images

Black pointed to companies like Woodside and BHP as examples of local companies going offshore due to the uncompetitive nature of Australia.

“And we saw just two weeks ago AirTrunk, the data centre operator, invested $42 billion in India. This is money that we would like to see invested in Australia, and unfortunately, consistently, the feedback I hear is that our settings aren’t sufficiently competitive to earn that investment.”

Compliance costs were also an issue, he argued.

“With any type of reform, you need to consider the costs and the benefits associated with that reform ... We see that 10 million Australians are affected by reforms ... that’s half of Australia’s adult population, are subject to higher compliance costs, and we see that there is no productivity uplift and no economic growth dividend that comes about as a consequence of the changes either, and so in those circumstances we say, is that benefit worth the cost, and we would argue no.”

Chamber of Commerce Says No Reason to Target Business

The Australian Chamber of Commerce and Industry (ACCI) told the committee that it is “alarmed” by the speed at which the government is progressing the legislation.

Andrew McKellar, the organisation’s chief executive, argued that the government could not push “such consequential legislation through Parliament within a few weeks of its announcement, without proper consultation with affected stakeholders, or a clear understanding of the consequences.”

He said that whenever the government was asked about the impact on business, the answers often relate to the residential real estate market, which are a “different story.”

“We just do not think there is any reason why Australia [needs] higher taxes on investment in business. That is a choice that the government has made out of a myriad of different options for tax reform.”

Call for Small Business Concessions to be Broadened

Matthew Addison, chair of the Council of Small Business Organisations Australia (COSBOA), called for thresholds for the small business CGT concessions to be increased to an annual turnover of $10 million, in line with the Australian Tax Office.

“There’s 2.7 million businesses that are defined as small businesses that turn over less than $10 million. [Of those,] there’s 2.5 million who turn over less than $2 million. So that is about 180,000 businesses that will be caught in that turnover change,” he said.

The organisation’s chief executive, Skye Cappuccio, said the organisation was “deeply concerned” that the proposed changes “risk undermining entrepreneurship, investment, and business growth at a time when Australia is already facing significant productivity challenges.

“The proposed reforms change the risk and reward equation for those Australians who choose to start, build, and grow a business. The changes disproportionately affect founders who start with little capital and who have created value through hard work, innovation, and persistence,” she said.

All three business organisations said suggested changes to the legislation, such as introducing income averaging, would not be sufficient to remedy problems with the legislation and supported a complete overhaul of the tax system.

Prime Minister Anthony Albanese last week told the Australia’s Economic Outlook summit that Labor’s reforms were needed to bolster social cohesion.

“If people think the economy isn’t working for them and they’re working their guts out and they’re not getting an opportunity, I'll tell you what, they will turn to more simplistic, grievance-based politics,” he said.

The measures are opposed by the Coalition and One Nation.