Finance Minister Katy Gallagher has dismissed concerns that the government has been flat-footed in its approach to tax reform, following intense scrutiny from Green senator Nick McKim over controversial ministerial discretion powers in the legislation. These powers would grant Treasurer Jim Chalmers the final say on which asset classes are affected by new capital gains tax (CGT) rules and the definition of new builds central to negative gearing changes. The legislation, introduced by Chalmers, passed the House of Representatives on Thursday.
Crossbench Criticism
Members of the crossbench, including the Greens, have criticised the breadth of the Treasurer's discretionary powers. Senator McKim questioned whether the government is serious about reform, given the potential for a future Treasurer—possibly from the Liberal Party or One Nation—to use these powers to walk back Labor's reforms. In response, Senator Gallagher, acting for the Treasurer during Senate estimates, called the suggestion laughable.
“Are you kidding me? Is that a serious question?” Gallagher told the Senate Economics Legislation Committee. “The last two weeks of commentary about our reforms to capital gains tax, you don’t think that’s real?” McKim doubled down, asking if the government had considered how a future Treasurer might undermine the reforms. Gallagher emphasised that the powers are disallowable by parliament and not unusual for complex legislation.
Treasury Secretary Under Fire
Earlier, Treasury Secretary Jenny Wilkinson faced questions from opposition spokeswoman Claire Chandler about whether young Australians would face higher taxes due to the scrapping of the 50% CGT discount. Wilkinson said Treasury analysis shows about 90% of young people would face lower taxes, as most save for deposits through salaries and wages. She also apologised for a bungled figure in a recent speech, where she understated the benefit middle-income earners received from the Howard-Costello CGT regime. The correct figure was $10,000, not $5,700. Wilkinson attributed the error to a transcription mistake and took full responsibility.
The Coalition has argued that Labor's CGT reforms, aimed at tackling intergenerational inequity, would harm young Australians who invest to save for a house deposit. However, Treasury analysis counters that most young people rely on wages rather than capital gains.
