Nick Rheinberger:
Let’s hear from the government now. We’re hearing about what has been changed, perhaps we need to find out why. Dr Daniel Mulino is the Assistant Treasurer and Minister for Financial Services and joins us now here at ABC Illawarra. Daniel Mulino, g’day.
Daniel Mulino:
Oh, thanks for having me on, Nick.
Rheinberger:
No worries. Many people have structured their financial lives around property tax settings which have been in place for decades now, and they could be frustrated this morning because they might need to rearrange their finances. Why were these changes to negative gearing and capital gains tax necessary?
Mulino:
Yeah. Well, firstly, you know, when it comes to negative gearing, I just want to stress that the changes that we’ve made have been grandfathered, because we understand that people who have made long‑term decisions in the past made it on the basis of a certain set of rules.
So if you’ve owned a property and are negative gearing it and you owned the property before the speech last night, you won’t be affected by these changes.
But in terms of the rationale for these tax reforms, the first is that, look, there’s a broad acceptance, I think, in the community that getting into the housing market for young people is too tough. This has been a long‑standing issue, but it’s getting worse. We’re really focusing on supply, and that’s been our number one priority since we came in in 2022. But we’re also increasingly of the view, and this was informed by the Economic Reform Roundtable last year, that we need to pull other levers, and I think moving forward, improving our tax system so that it better leads to outcomes in the housing market that are focused on owner‑occupiers is an important thing there.
The second overarching issue, and we can talk about this after, but is an issue of fairness, and that’s where we come to issues like, you know, capital gains tax, but also trusts, just making sure that our tax system is fairer between people who work and people who earn income off assets.
Rheinberger:
I completely understand, and many people would support that. But we’ve seen first home buyer schemes make prices go up, capital gains 50 per cent discount made prices go up, negative gearing made prices go up. The only real solution is supply. How will any of these budget changes actually increase the supply of houses in the market, which is the only way to do this in a sustainable way?
Mulino:
Yeah. So, look, we are focused on supply and I agree with you supply has to be the centrepiece, and if you go back through the last 4 years we have the Housing Australia Future Fund, we’ve had social housing investments, we’ve had investments in local infrastructure to help local governments release land and then build the basic infrastructure, so supply is the main focus.
But what we’re looking at through these additional levers, like moving forward changing the way that we address negative gearing and capital gains, is to say that for a given supply we think it’s better for the first home buyers, for younger people, if, for a given supply, there’s a healthier weighting towards owner‑occupiers relative to investors.
And so, what the Treasury modelling says is that these changes over the medium term are likely to see a shift for that supply that we have in the model of 75,000 that will shift from investors to owner‑occupiers, and I think that’s a good thing, especially for people trying to get into the market.
Rheinberger:
Well, that’s a shift – okay, that’s a kind of financial shift on who is owning the properties, but it’s not giving us more properties. You know, we’re not offering incentives to builders, to apprentices, land releases, you know, the actual physical things that create more properties in Australia, more supply, therefore prices go down. You’re just shifting the deck chairs, aren’t you?
Mulino:
Well, no, so we’re doing both. In addition to that, that I just talked about, that change of composition, we are also adding to supply, and the Treasury modelling is that the measures in this Budget alone will add 65,000 new homes over the medium term. That includes $2 billion to support infrastructure projects that enable new houses to be developed.
But we also have the Housing Australia Future Fund, which is a very substantial $10 billion fund, which provides support for social and affordable housing. So there’s a whole lot of measures which we’ve been putting in place progressively throughout our term. There’s over $40 billion in measures to support additional supply. So additional supply is critical, and what I’m saying is that in addition to that, so additional levers, would include measures that help first home buyers move to owner‑occupier status rather than renting.
Rheinberger:
Okay. We have a brief comment from Arthur Rorris, South Coast Labour Council on capital gains tax. Good morning.
Arthur Rorris:
Good morning Nick. Look, there seems to be a bit of misinformation, a bit of a scare campaign. I just wanted maybe some confirmation from the Assistant Treasurer. On paper at least, the way I’m calculating it, if you sell a property say in ‘28 or ‘29, the capital gains tax, the additional capital gains tax, that is the indexed one, only applies from 2027. So if inflation, which is currently running at 5 per cent outstrips the annual rise of housing, it’s possible that some of these investors, the property investors, won’t get hit hard at all, in fact they might even make a profit by claiming some of that tax back. Is that correct?
Mulino:
Well, see, you’re exactly right, that if you look beyond 1 July 2027, you’ll be able to index the cost base by inflation, and what that means is that the CGT will return to its original intent, was that you’re only taxing real gains.
So what we’ve seen with the CGT, after the 50 per cent discount was introduced, it became arbitrary in 2 senses. Firstly, it became arbitrary between different assets, and so assets that rose really quickly in value were being under‑taxed relative to their real gains, and assets that increased more slowly were being over‑taxed, but also what it meant was that if you look at over time during periods of high inflation, there would be under‑compensation to people for the real gains they were making. And so this is a more coherent and rational way. It really goes to whether assets are making real gains or not, and going to the actual underlying – letting people basically discount their tax obligation for the underlying inflation and get to the real gains they’re making.
Rheinberger:
All right. Thanks for your question, Arthur. On rentals, I know your modelling has got it going up by about $2 a week, $100 a year. We’ve had the Real Estate Institute say rents will explode because too many people will actually exit the market. How do we judge between these 2 analyses?
Mulino:
Look, I think the intuitive explanation for me is that, and it goes back to that composition change that I mentioned, is that we do expect there to be a shift for any given supply and we are trying to increase supply, as I mentioned. What we expect is that there will be less investors, and what that will see is that those houses will shift to being owner‑occupied instead.
Those owner‑occupiers, those 75,000 people or 75,000 households over the medium term, that shift to being owner‑occupied used to be renters by and large. So that will see a reduction in the rental demand because those people are now able to buy their own home. So that’s why the impact on rents should be pretty minimal.
Rheinberger:
You’re with Nick Rheinberger on ABC Illawarra. Our guest is Dr Daniel Mulino, Assistant Treasurer and Minister for Financial Services.
We understand that there has to be savings made to pay for other elements of the budget. One is of course the NDIS. There’s a huge amount of money being saved allegedly on the NDIS. In the meantime I’ve spoken to a few people with disabilities this morning, and they say they’ve got a level of dread about what’s going to be cut. What would you say to people who are really frightened that this money‑saving campaign on the NDIS is going to leave many people without support that they need?
Mulino:
Well, so what I’d say is I think that the reforms that we have put through in this Budget will really take the NDIS back to its core purpose, which is to provide necessary and appropriate supports for people with permanent, serious disabilities, and that’s really the goal.
Now we are looking at some savings and the main savings are around issues like, where there are currently reassessments of packages, it’s happening at a rate that I think is broadly acknowledged to be too high. There need to be reassessments occasionally, for example, where somebody’s carers, family carers pass on, for example, but at the moment too many cases are being reassessed each year. So we’re wanting to put tighter controls on that.
There are some benefits, such as community supports, which we will continue to fund, but just at a slightly lower level, and there are also some people who are high functioning who we think can be, over time, with adjustment periods, better supported by other programs than the NDIS.
So the NDIS is actually going to continue growing in funding, just at a slightly lower rate, and what we’re really trying to do is to make sure that it’s there for the people that it was always designed for, people with permanent and very serious disabilities.
It’s a core Labor reform. I totally support it, as does the government, but look, it has gotten to the point where in order to ensure that it is sustainable going forward we need to look at some of the areas of most growth and deal with those.
Rheinberger:
Just finally, Daniel Mulino, I’ve mentioned I really don’t like this black‑and‑white, winners‑and‑losers analysis that we see around this time. The better question is, is it good for the country? How would you say the daily lives of our average listeners are going to be materially improved with this Budget?
Mulino:
Well, so I think firstly we have a number of productivity measures in the Budget, so a lot of small business measures, a lot of measures to reduce red tape. So that will lead to higher growth, that is absolutely critical.
Secondly, we have a very responsible Budget that has major savings in it, $64 billion in savings and reprioritisations, which is critical at this time where the economy is experiencing a global inflation surge.
And thirdly, we’ve got a number of measures that deal with cost of living. So for me, one of the core things coming out of the tax reforms is that they’re broadly budget neutral, but there’s a re‑balancing from taxes on capital, re‑balancing it so that they increase slightly, that that goes to workers, lower taxes on workers, $250 now every year for all Australian tax paying workers as an offset, so that rebalance is critical for me and something that people will see in their tax return every year from the ’27‑‘28 return.
Rheinberger:
All right. Daniel Mulino, thanks for your time this morning.
Mulino:
Thanks a lot, Nick.
Rheinberger:
That’s the Assistant Treasurer and Minister for Financial Services, Dr Daniel Mulino.