Jim Chalmers:
A really big thank you to James and his colleagues here at BM Sydney Materials for welcoming us here in Cabramatta. We’re here with Anne Stanley and Tu Le, 2 wonderful Labor people and supporters of small business and the housing industry in this wonderful part of suburban Sydney.
The Budget was about housing, about building more homes, about dealing with youth homelessness, about making the tax system fairer for more aspirational young people in our society and also about helping builders with compliance costs. The reason we’re here talking with James and the team about building supplies is because a big focus in the Budget was helping to get costs down for tradies. This is all about helping tradies save cash and cut costs. The initiative in the Budget is about the government stepping in and paying for access to Standards Australia for tradies.
More than half a million Australian tradies will benefit from this policy, which is all about funding access to standards that tradies would otherwise be forking out for. What happens typically is that a tradie would pay thousands of dollars to access Standards Australia material. Over the next couple of years, the government is stepping in and funding access to those standards.
This is good for productivity, it helps tradies work across different borders, but most importantly, this is all about more cash for tradies and helping them to cut costs. A big focus of the Budget was getting compliance costs down. Overall, the productivity package in the Budget will save more than $10 billion a year, and a really important part of that is this additional help for Australia’s tradies who we are counting on to build the houses that we desperately need in local communities like this one.
Happy to take a couple of questions.
Journalist:
Treasurer, these business owners are standing behind you, but there are a lot of people online making memes with the Prime Minister saying that he is an unwanted co‑owner taking 47 per cent of their business. Are you failing to sell your message on this particular Budget?
Chalmers:
I don’t believe so, but obviously when you’re making difficult economic reforms that can be politically contentious. It’s not surprising to us that some people would prefer that the existing arrangements stay exactly as they are. But those existing arrangements are locking too many Australians, particularly young Australians, out of housing.
We’ve taken some difficult decisions – some politically contentious decisions – to fix a challenge that we’ve got at the intersection of our housing market and the tax system. Our changes are all about applying a fairer, more neutral treatment to different kinds of assets. If you think about the way that the tax changes were made at the end of the 1990s, that introduced a whole bunch of distortions which have played a role in house prices growing dramatically faster than incomes. And that’s what’s locking a lot of people, especially a lot of young people, out of housing.
The Budget was about housing. An important part of that is making the tax system fairer for people and making it easier for Australians, particularly young Australians, to get a toe‑hold in the market. When it comes to that social media campaign, obviously I’ve seen that and the Prime Minister’s commented on that already today. We’re not changing the 47 per cent marginal rate that’s been referred to in those memes.
What we are changing is the way that the capital gains tax discount is calculated. There will still be a discount, but it will be calculated according to inflation rather than the nominal discount that has applied between 1999 and now. We’re going back to the system that existed before this distortion was introduced into the market at the end of the last century.
Journalist:
But a lot of the people that you’re saying you’re helping, young people, are some of the people criticising you online. And if it is about housing, as you say, why do CGT changes for shares?
Chalmers:
Because we’re not trying to introduce new distortions into the system, we’re trying to remove the existing distortions in the capital gains tax regime. Those distortions which were introduced by Howard and Costello made a negative impact on housing in particular, and we don’t want to replace one set of distortions with another set of distortions. I made some comments about this at the Bloomberg Global Forum earlier today. This is about a fairer, more neutral treatment of capital gains.
If you look at a 20‑year period between when these changes were introduced in ‘99 and now, we looked at the average over a 20‑year period and it’s very clear that housing was overcompensated and other investments like shares were undercompensated. In fact, when it comes to shares, if you look at that 20‑year period on average, with reasonable assumptions, what you see is that share owners would have been broadly about the same off as the 50 per cent arbitrary discount, and some would have been better off.
It’s not necessarily the case that everyone would be worse off under these changes, some people would be better off under these changes. It depends on their marginal rate, it depends on the type of share they’re invested in and how long they hold that for. But overwhelmingly, this is about a fairer, more neutral treatment of assets in the tax system.
Journalist:
You flagged changes to CGT for entrepreneurs. Are there any guarantees you can make?
Chalmers:
Well, we said before the Budget privately, and we said in the Budget papers on Tuesday night and subsequently publicly that we’re engaging with the start‑up sector. It’s a very, very important part of our economy – a small part of our economy but we want it to be bigger. That’s where a lot of the dynamism and productivity will come from into the future. That’s why we flagged specifically in the Budget papers the ongoing consultation when it comes to the implementation of this, recognising that start‑ups have a different cost‑based calculation. We said that on Budget Night.
I’ve been doing some of that consultation myself and the Treasury Department has been doing some of that consultation as well. It’s not unusual when you’re making important changes to the tax system, reforming the tax system, that there’d be some consultation on implementation and that’s what we’re engaged in.
Journalist:
Treasurer, critics say any move to tighten capital gains will discourage investment and entrepreneurship. How do you respond to concerns that Labor’s punishing small business owners?
Chalmers:
Well, first of all, the existing generous concessions and carve‑outs for small business in the capital gains tax system are not being changed. In the tax reforms that we announced in the Budget, we’re not changing those generous concessions and carve‑outs for small business. What they typically mean is that small businesses receive somewhere between half and a full concession in the capital gains tax system. They’re not being changed, I’ve seen some misinformation about that. They are not being changed.
More broadly, when it comes to the way that these tax reforms apply – as I said in relation to Isobel’s question – over the last quarter of a century the distortion that’s been introduced in the capital gains tax system has massively over‑compensated investing in fixed housing and it’s under‑compensated investment in new units or medium‑density housing, or in some instances even shares. By introducing this more neutral treatment, some kinds of investment will become more attractive relative to housing, and that’s because a more neutral treatment of different kinds of assets means that people will invest looking for the best economic outcomes and not necessarily just the best tax outcomes.
Journalist:
Just a question from my friends at Channel 10. Are Australia’s high alcohol taxes –
Chalmers:
It’s good of you to ask a Channel 10 question.
Journalist:
– is Australia’s high alcohol taxes likely to create an incentive for illicit alcohol markets?
Chalmers:
We think that the arrangements for tax in that part of the Budget are broadly right. We froze the beer excise not that long ago, but broadly we’re not anticipating changing those arrangements. The alcohol system is pretty well regulated, the alcohol sector, alcohol market is pretty well regulated. We’re not seeing any substantial evidence of any change in behaviour, so the tax reforms in the Budget are not about alcohol taxes.
Journalist:
Treasurer, the New South Wales Minister for Women has struggled to answer questions related to defining what a woman is. Can you provide a definition of the word ‘woman’?
Chalmers:
It’s an adult female, as we’ve said on a number of occasions. I haven’t been closely tracking the interviews and commentary with state colleagues in the state ministry. I think people would understand I’ve had my mind on other matters.
Thank you.