Treasury Laws Amendment (Tax Reform No. 1) Bill 2026

Milton Dick

In accordance with the resolution agreed to earlier, the question now is that amendments (1) to (4) circulated by the member for Wentworth be agreed to.

M ember for Wentworth's circulated amendments—

(1) Schedule 1, page 9 (after line 13), after item 7, insert:

7A At the end of Division 102

Add:

102-31 Income averaging

(1) The regulations may provide for or in relation to the proportional allocation, by individuals, of capital gains over the shorter of:

(a) the period for which the individual holds the relevant *CGT asset; and

(b) a period of 10 years.

(2) Regulations made for the purposes of subsection (1) may directly amend the text of this Act.

(2) Schedule 1, page 9 (before line 14), before item 8, insert:

7B After section 110-10

Insert:

110-11 Indexation of capital losses

(1) The regulations may provide for or in relation to indexing the *reduced cost base of a *CGT asset.

(2) Regulations made for the purposes of subsection (1) may directly amend the text of this Act.

(3) The Minister must take reasonable steps to ensure that regulations are in force for the purposes of subsection (1) within 6 months after the commencement of this section.

(3) Schedule 1, Part 2, page 40 (line 1) to page 43 (line 26), omit the Part.

(4) Schedule 1, Part 4, page 47 (after line 24), at the end of the Part, add:

84A Application of amendments — active assets

The amendments made by this Schedule do not apply in relation to a *CGT asset that is an *active asset.

Allegra Spender

I've been advocating for tax reform since I was first elected, and I welcome the government's guts to bring a serious proposal forward. I share many of the ambitions the Treasurer has identified in his budget, but I cannot support the bill's proposals in their current form. It's not because I don't support the intent. The government has correctly diagnosed significant problems in Australia's tax system. It's not because I don't support the broad direction of measures. I believe we do need to rebalance the tax system to reduce our reliance on wages and to pay for that by reducing concessions on assets alongside reducing spending as well. But I cannot support the bill in its current form for three reasons.

Firstly, not all of the revenue is being returned to the taxpayers. Some of it—$77 billion—has gone to the government, and I don't believe that's what the community wants. Secondly, I think there are real issues that are unresolved with the CGT model the government has chosen. Thirdly, this bill has been rushed through in an unacceptable way. You cannot say that this is the most important tax reform in a generation and then rush it through as it has been.

I have put amendments forward in relation to the CGT model because I think this is an area where there is an opportunity to get it right. I recognise that the government has an intellectually consistent approach, which is trying to make sure we only tax real gains, and that is what they're trying to do in this budget. I accept that they've done that well, but I don't think that's the main objective we should have in how we tax CGT. I think we also need to consider international competitiveness and incentives for risk taking that make it easy for people to plan and are simple enough for them to understand. That helps create a fair society. Those are the other considerations. I think the government should, instead of the work that they're doing, move to a reduced flat discount to, say, 35 or 40 per cent rather than an indexation approach, because I think that would narrow the gap between the taxation of labour and capital, produce a model comparable to other countries, raise similar amounts of revenue, not have issues with high-growth businesses or high-growth investments, and people would understand it.

Regardless, given that the government has moved forward with this CGT model, I think there are three amendments that deal with three of the known challenges to the model the government has put forward. Firstly, I've moved an amendment to remove active businesses from the new indexation CGT regime and remain under a flat discount regime until such a time as the issues around startups and small businesses are resolved. I recognise the government is serious about trying to resolve some of these issues, but these changes should not be made until those issues are resolved. Secondly, a second amendment would allow regulation to deal with the issue of capital gains being taxed on a real basis and losses being taxed on a nominal basis. I recognise there are integrity issues around this, and I recognise the government is sincere in trying to deal with them, but, honestly, this is a significant issue in this model of indexation of CGT. I think, if the government isn't willing to deal with these issues, it needs to recognise this model is not perfect either and that other models should be considered. Finally, I think that, instead of using a flat 30 per cent minimum real tax rate, the government should income average over the life of the asset or up to a maximum of 10 years. This is different to the Keating model, because the Keating model did allow for game playing in terms of some of the issues that have been rightfully identified. It would ensure that people pay tax at the marginal rate of the time that they held the asset, on their CGT. I think that is not an unreasonable mechanism. It would deal with many of the issues the government is trying to deal with in relation to the 30 per cent minimum real tax rate but would do it in a way that people would find easy to understand and that is simpler. Those are the three changes I have put forward in terms of this bill.

I recognise that none of these amendments are perfect, but I also don't think the bill is perfect. The government is not giving this bill enough scrutiny in the Senate and it is not giving enough consideration to the real issues with the bill, nor is it trying to make the bill better. I stand on the basis that I want this bill to be better. I want the government to make really substantial tax changes that make a real difference to the country over a long period of time. But, at this stage, I think there are issues with what the government has done, and they need to be resolved, and they should be resolved in the House before we're obliged to pass the legislation.

Jim Chalmers

Thank you to the member for putting her amendments. Of course, in the legislation before the House we are making the sorts of changes that the member has long called for to address a number of serious challenges in the system, which the member has long railed against. The idea that people don't have an opportunity to express their views doesn't stand up to scrutiny, particularly in relation to the member for Wentworth, who has been included over a long period of time in these sorts of deliberations.

On the specifics raised by the member, when it comes to income averaging, the reason that the Ralph review proposed removing averaging was for integrity reasons. When it comes to the indexation of losses, if we allowed that, that would mean that more people would sell and repurchase the same assets to offset other gains. That would disrupt markets and reduce the integrity of the system. On the minimum tax, we're making sure that the tax rate that people face will be more in line with the rate that they faced during their working life and with the tax rate paid by most workers. These reforms will make the system fairer and more efficient. They mean people will be more accurately compensated for inflation, and they reduce the incentive to defer selling assets until it's most advantageous in tax terms. For those reasons, we won't be supporting the amendments put forward by the member.

Milton Dick

The question is that the amendments moved by the honourable member for Wentworth be agreed to.