Treasurer’s Stance on Franking Credits and Tax Reforms
Treasurer Jim Chalmers has made it clear that there will be no changes to franking credits, even as the Labor government and the Coalition clash over proposed cuts to capital gains tax and negative gearing. Since the release of the budget, Chalmers has been working to convince both voters and critics that the Albanese government is not breaking its promises by reducing housing investor tax benefits.
Chalmers emphasized that while it would have been easier to leave things as they are, doing so would have made the problem worse over time. “It would have been the easiest thing in the world… to make a political decision to leave everything just as it is,” he said during an interview with the ABC. “But, the longer that we left that, the harder this problem would have become for a lot of people.”
When questioned about the government’s reliability after the recent policy reversal, Chalmers ruled out any changes to franking credits. This measure was part of a broader set of reforms that were central to then-Labor leader Bill Shorten’s failed 2019 campaign. The proposal would have ended cash refunds for excess franking credits while still allowing them to be used to offset taxes owed.
“Well, there’s no change to the treatment of franking credits in the budget,” Chalmers stated on Sunday. He also confirmed that there would be no changes to superannuation or gas tax policies.
Addressing Negative Equity Concerns
Housing Minister Clare O’Neil faced questions about whether younger Australians could avoid entering “negative equity” despite Labor’s efforts to overhaul investor tax benefits. During an appearance on Sky News, O’Neil highlighted the government’s reversal on capital gains tax and negative gearing changes, along with first homebuyer schemes that allow purchases with as little as two per cent deposits.
O’Neil claimed these changes would create a “level playing field for first homebuyers.” However, when pressed on whether younger homeowners would still face negative equity, she was less certain. “I can’t, you know, the housing market is, you know, price movements occur in the housing market,” she said. She added that Treasury did not predict such outcomes.
O’Neil noted that Treasury forecasts suggest house prices will continue to grow, albeit at a slower rate. “We’ve got the balance right,” she said, referring to the government’s approach of neither doing too little nor too much.
The Housing Market and Policy Challenges
O’Neil acknowledged that the current housing market is “cooked” and not serving the Australian people effectively. “It’s not serving the Australian people anymore,” she said. “We want people on normal incomes around our nation to have a fair shot at getting into housing.”
Labor plans to reduce the capital gains tax discount and limit negative gearing to new builds or grandfathered properties following the May budget. However, the party will need support from either the Coalition or the Greens to pass these measures through the Senate.
O’Neil emphasized that the changes are part of a broader effort to address housing inequality, which includes boosting supply. “Treasury modelling suggests that the impact of these changes will be to turn 75,000 rental households into first home buyers households,” she said. One way this will happen is by slightly slowing house price growth.
Political Implications and Criticisms
Despite these efforts, Labor faced a setback in the first major polling since the budget, with One Nation surpassing Labor on the primary vote according to Roy Morgan. Chalmers responded to the results by stating he would be “more surprised” if the outcome had been different. “We didn’t do this to get a bounce in the polls,” he said. “We did it to get a boost in first time ownership, particularly among younger Australians who’ve been locked out.”
Chalmers defended the application of capital gains tax changes to shares, noting that nine out of ten people under 25 don’t own shares. “For people who do, by getting rid of this distortion which over compensates established housing and under compensates shares or investments in new supply of units and the like, then that will be a much fairer, much more neutral treatment of capital gains in the system.”
He added that the current intersection between the housing market and the tax system is broken. “It’s locking too many people out of home ownership, and so our primary motivation here is to better align the tax treatment of people who work and people who earn their income in other legitimate ways.”
Opposition Leader Angus Taylor criticized the government’s approach, announcing that the Coalition would scrap many of Labor’s housing initiatives and link net overseas migration to housing completions. “Labor has set its immigration targets without regard for the housing that is being constructed in this country,” he said. “This must change, and what we’re proposing here is each year the housing minister would say we’ve built this many houses and so the immigration number, the net overseas migration number, can be X.”
