Labor’s tax overhaul of wealth creation vehicles has won cautious backing from some economists during a Senate committee examining the new laws.
The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, which has passed the lower house, is being scrutinised by the Senate Economics Legislation Committee.
The package was the centrepiece of Treasurer Jim Chalmer’s May budget and includes new restrictions on negative gearing, a new tax on trusts, and the abolition of the 50 percent discount on capital gains tax (CGT) to instead, be replaced by a flat 30 percent tax and inflation costs.
Michael Brennan, chief executive of the economic research group, the e61 Institute, said an inflation-adjusted tax was a fairer approach than using a uniform discount.
“A fixed discount does not adequately take account of what is effectively out there in the world, a wide variation in real returns made by those receiving capital income,” he told the committee on June 15.
CGT is paid based on the profit generated after an asset, like an investment property or business, is sold. The 50 percent discount is applied on that profit so that only the remaining 50 percent is subject to CGT.
Brennan argued that this system meant for high profit sales the tax bill was actually “pretty light” compared to lower profit sales.
Robert Breunig, economics professor at the Australian National University, was concerned the country’s overall tax system was inconsistent, noting that different taxes applied dependent on whether investment was in housing, shares, trusts or other assets.
Breunig said it meant there was less focus on economic value, and more about gaining tax advantages.
“This creates distortions on those investment decisions,” he said. “It creates margins for tax planning.”
“It creates incentives for leveraged investment.”
While Breunig said Labor’s reforms would reduce some of those problems, he stressed they would not eliminate them.
“I see the reforms we’re discussing as a step in that direction.”
Labor’s tax overhaul has received firm opposition from other parties though.
Forty-five tech business leaders argue the CGT change discourages entrepreneurs from taking the risk of starting up a business and growing it.
“But the changes to the CGT discount on shares will do nothing to make houses more affordable. All they will achieve is to suck the ambition, drive and hope out of the hearts of young business builders nationwide.”
Social media was flooded with AI generated images of Prime Minister Anthony Albanese alongside business owners, often with the caption: “Meet my new 47 percent co-founder”—amid concerns the new taxes amounted to losing half of their profits.
Treasurer Chalmers has stood by the changes, arguing it will assist young Australians with buying a home by dissuading investors from entering that market.
“We need to recognise that a big policy mistake was made at the end of the 1990s which made investing in established homes much more attractive by overcompensating that, and it meant that investing in other types of assets like shares was under compensated,” he told 60 Minutes on June 14.
“If you look at a period between that policy mistake and now, over a couple of decades, then in lots of instances investing in shares was under compensated in the old system.”
