Labor, Greens strike deal to pass capital gains tax, negative gearing changes after Budget

The Greens have agreed to pass changes to the capital gains tax discount and negative gearing in exchange for Labor limiting self-managed superannuation funds from buying residential property.

The minor party’s support means the Government will get the bulk of its Budget tax package in place on Thursday.

But the Greens have also insisted on delaying to at least August the NDIS cuts the Government had sought to pass this fortnight, at a cost of several hundred million dollars.

Leader Larissa Waters said that, on balance, the tax package “is a small step in the right direction”, but her party would fight at every step to stop the multibillion-dollar NDIS cuts.

“The government could have actually tackled the housing crisis, but they didn’t have the guts to do that... The Greens are here fighting for renters, for ordinary Australians, for people who deserve to have a roof over their heads and their basic needs met, and we will continue to fight for good outcomes in this place,” she said.

Prime Minister Anthony Albanese said the deal reflected the realities of having to get legislation passed through the Senate, a sentiment echoed by Treasurer Jim Chalmers and Health Minister Mark Butler.

“Today, we have secured support to get this legislation through the Parliament with the majority of senators,” Mr Albanese said.

“I expect that, just as the three right wing parties have opposed every one of our tax cuts, every pay rise for workers, every cost of living measure, every policy to build more homes and help more people buy a first home, they will oppose these measures and continue in their race to the bottom to see who can be more anti-aspirational, more anti-worker.”

Ministers hope a swift process on passing the tax changes will dampen the fiery opposition that Mr Albanese labelled “self-interest” over the weekend and Dr Chalmers has slammed as a campaign of lies.

The tax package replaces the 50 per cent capital gains tax discount with one based on inflation, and imposes a minimum 30 per cent rate on the taxable portion.

It also limits negative gearing for properties bought since May 12 to new builds only, and sets up a $250 working Australians tax offset and $1000 standard deduction.

Last week, Mr Albanese and Dr Chalmers announced some back downs, including limiting the level of ministerial discretion to change elements of the package without returning to Parliament, which the Greens had complained went too far.

Greens economics spokesman Nick McKim laid out the rest of what the party wanted in his section of Friday’s report from the snap Senate inquiry into the tax bills.

It called for grandfathering of negative gearing limited to one investment property per person, and limits on the ability of self-managed superannuation funds to invest in the housing market.

The Government has agreed to the latter, with the Greens securing an amendment to remove exemptions that currently allow SMSFs to borrow money to buy residential property.

This change is expected to improve the Budget’s bottom line by $50 million over the next four years. SMSFs make up less than 1 per cent of residential property borrowing.

It didn’t give any ground on the negative gearing plan.

“What this will mean is that the major elements of our ambitious tax reforms will be in place once this passes both houses of Parliament,” Dr Chalmers said.

But shadow treasurer Tim Wilson said it looked like Labor had lost control of its budget.

He labelled the deal with the Greens “dodgy, dishonest and dangerous” while leader Angus Taylor said it was “rotten legislation”.

“We don’t know what’s in that deal. We do know, we do know this: that self-managed super funds are getting going to get hit,” Mr Taylor said.

“We will go to the next election, campaigning every day between now and then to axe these toxic taxes.”

A majority Australians are pessimistic about the country’s economic performance, according to the annual Lowy Institute poll released on Tuesday.

Its survey, taken in March before the Budget, found 59 per cent were gloomy about the state of the economy – a massive 12-point jump from last year, and higher than the level of pessimism during either COVID or the global financial crisis.

A Senate inquiry into the NDIS legislation was supposed to hand down its twice-delayed report on Tuesday, but that has now been put off until August 14.

The Government has also agreed to make amendments the Greens say will “firewall” some areas of the scheme from further cuts.

But it will still have to turn to the Coalition to ultimately pass the changes aimed at saving upwards of $150 billion over the next decade.

“We will continue to work every step, every role, every vote, every motion, every time to oppose this bill, to have it shut back into the bin, and to get on with the work of building an NDIS that actually meets the community’s needs,” Greens disability spokesman Jordon Steele-John said.

Both the Government and the Greens painted this as a test for the Coalition.

“We handed down a budget in the context of, we know we have to get things through the Senate,” Mr Albanese said.

“We’ve had debates for a long period of time in this country calling for tax reform. When you see it, everyone who says that they need it, not everyone then comes on and says, ‘Okay, we need this change or this shift or this amendment’. Some of them just say no to everything.

“That’s not our approach. We work things through constructively. We’re confident that the NDIS reforms (are) also a test for Angus Taylor.”

Mr Taylor said he wanted to make sure the NDIS was financially sustainable, but when pushed on whether he could find a compromise to pass it, he would only say he wouldn’t do a deal on taxes.