A veteran of the Labor Party, Bill Kelty, a key figure in the Hawke-Keating economic reforms, has made a passionate plea to the Albanese government. He urges them to implement genuine tax reform that benefits young Australians, stating that older generations, including himself, don't require further assistance.
Kelty, a former Reserve Bank board member and ACTU secretary, appeared before a Senate inquiry on capital gains tax (CGT). He argued that the growing support for fringe political groups among young people is partly due to a tax system that actively disadvantages them.
However, any potential changes to CGT face strong opposition. The Housing Industry Association warns that additional taxation on homes could lead to fewer new homes being built for future generations, a controversial stance.
The federal government is considering amending the current 50% concession on CGT, introduced by the Howard government in 1999, as part of a broader tax system overhaul. Prime Minister Anthony Albanese and Treasurer Jim Chalmers have remained tight-lipped on whether they will change the concession.
Kelty believes that merely altering the CGT concession would be ineffective, labeling it as yet another ad hoc tax measure. He emphasizes the need to build more homes to address the issue.
He proposes that CGT reform should be part of a comprehensive suite of tax changes that benefit young Australians. Such an approach would address a tax and budget system that overwhelmingly favors older generations.
"This inquiry is crucial as it provides an opportunity for our parliament to stand with young people," Kelty said. "The current tax system is terrible for young people. It's not just bad; it's terrible."
Kelty, who supported the introduction of CGT by Paul Keating in 1985, highlights that young people today face marginal tax rates of up to 60% on earnings above $80,000. He argues that young people will bear the brunt of taxes for programs like AUKUS and an unfundable NDIS, while older generations have benefited at their expense.
High-income earners, including Kelty and federal politicians, "need nothing" more from the tax system, as they have the means to avoid the top marginal personal income tax rate of 47%.
Brendan Coates, housing and economic security director at the Grattan Institute, suggests halving the current CGT concession could raise an additional $6.5 billion in revenue. This money could be used to reform the tax system, reduce public debt, or invest in more housing.
Coates also proposes grandfathering existing property owners to minimize the impact on revenue, but this would result in younger Australians paying higher tax rates for a longer period.
Michele O'Neil, ACTU president, argues that the CGT concession unfairly benefits investors who can outbid first-time buyers with the assurance of a sizeable tax advantage. The ACTU, along with the Grattan Institute, supports reducing the concession to 25% and restricting negative gearing to a single investment property.
"Australian workers deserve a tax system that values their hard work over wealth accumulation," O'Neil said.
The inquiry has two more sitting days, during which supporters of the current tax system are expected to present their evidence.
Jocelyn Martin, HIA managing director, claims that housing is already one of the most heavily taxed sectors of the economy. She warns that reducing the CGT concession would act as a further tax on investors, potentially leading to higher rental costs or a surge in the rental property market.
"The current situation is already hindering the market's ability to deliver new homes. Even with approvals secured, the feasibility of projects of all sizes is becoming increasingly questionable," Martin said.
"Changing CGT arrangements will be akin to imposing a new tax on an already overburdened market."
Stay informed and cut through the noise of federal politics with expert analysis and insights. Subscribe to our weekly Inside Politics newsletter for more.
