Labor treasurer defends ‘sneaky’ two-day inquiry timeframe as tax-reform advocates square off against industry bodies
A Senate inquiry into Australia's most significant tax overhaul in decades opened in Canberra on Monday, drawing sharp divisions between housing equity advocates and industry bodies.
The inquiry centres on controversial reforms to Australia’s capital gains tax (CGT) and negative gearing regimes, which were announced in Labor’s Federal Budget on 12 May.
Under the Budget proposals, the existing 50% CGT discount for individuals, trusts and partnerships will be replaced with cost-base indexation, combined with a 30% minimum tax on net capital gains. Negative gearing benefits will be preserved only for new builds, while discretionary trusts will face a 30% minimum tax rate on taxable income.
Proponents of change argue the current settings introduced during the Howard era distort the housing market in favour of investors at the direct expense of owner-occupiers and renters. The reforms mark a deliberate effort by Labor to tilt housing policy toward owner-occupiers and first-home buyers.
But as MPA reported, prime minister Anthony Albanese promised no changes to property taxes before the election. Opponents have latched onto the fact to brand Albanese and the wider Labor party as untrustworthy and dishonest with the electorate.
While the reforms passed the House of Representatives with ease, this inquiry, coupled with significant political and public backlash, make the Budget bill less likely to pass through the Senate in its current form.
The inquiry itself becomes a flashpoint
Before a single expert had spoken, the format of the inquiry had already drawn fire. The Senate committee has been given just two days to scrutinise legislation with far-reaching consequences for millions of Australian property owners, investors and small business operators.
Treasurer Jim Chalmers defended the timeline in a 60 Minutes interview, arguing it was not unusual for parliament to conduct focused inquiries on issues it had already considered at length. He denied that the short turnaround time of the inquiry was “sneaky”.
Opposition senators pressed experts on the rigour of the government's modelling, with Liberal finance spokeswoman Claire Chandler challenging Australia Institute chief economist Greg Jericho to provide regression analysis isolating the CGT discount's causal role in housing price growth. Jericho acknowledged no such analysis had been conducted.
The case for reform: equity, productivity and tax neutrality
Melbourne Law School associate professor Kathryn James told the committee that a 50% CGT discount effectively has taxpayers subsidising the investment preferences of wealthy Australians.
"Imagine a government proposal to spend more than $50 billion a year subsidising the investment activities of the wealthiest 10% of Australians – it would be politically unthinkable, but this is effectively what we do when we provide the same support through tax concessions," she said. James described replacing the discount with inflation-linked indexation and a minimum 30% tax rate as an "appropriate response," adding that the evidentiary basis for arguments that reform would reduce work and investment was "weak”.
On productivity, Australian National University economist Peter Varela argued that the reforms could produce modest gains by reducing the tax system's distortion of investment decisions. "Tax neutrality will always get you more productivity," he told the committee. "To the extent that this removes some of those sorts of tax differences across different asset classes, people will do things that they would do in the absence of the tax system."
Assistant Treasurer Daniel Mulino pushed back against industry groups claiming the changes made Australia a less attractive investment destination, saying the reforms would return taxation to "real gains rather than an arbitrary reduction of nominal gains”.
Think tank Per Capita called for the Budget bill to be voted through the senate, with executive director Wesa Chau saying: “The combined changes to the capital gains tax and negative gearing will make it easier for first-time buyers to enter the property market and will have little to no impact on rents.”
The case against: housing supply and a SMSF loophole
Concern over the impact on housing supply dominated the arguments from the other side.
Master Builders Australia chief executive Denita Wawn said the changes will “stifle business and are likely to cause a private investment strike, leading to a significant decline in terms of economic capacity of our country”.
National Housing Supply and Affordability Council chair Susan Lloyd-Hurwitz acknowledged that the reforms could result in approximately 35,000 fewer new homes being built – a figure she herself had placed before the committee. While Lloyd-Hurwitz argued the equity trade-off was ultimately worthwhile, property, construction and mining industry groups are expected to mount a forceful challenge.
A separate risk identified by James added another dimension to the debate. With superannuation funds set to retain their existing one-third CGT discount – exempt from the new regime – James warned the committee of an emerging incentive for property investors to use self-managed superannuation funds (SMSFs) as a tax shelter.
"There will need to be a discussion had around the use of superannuation as a tax-minimisation vehicle," she said, noting that closing off further loopholes would be essential to the integrity of the overall package.
Read more: Federal Budget 2026: An SMSF opportunity?
Toward the end of the first day, Council of Small Business Organisations Australia (COSBOA) chair Matthew Addison delivered perhaps the strongest rebuke of Labor’s gargantuan tax overhaul so far.
“Tax reform should encourage ambition, investment, and growth. Our concern is that, as currently drafted, these measures risk doing the opposite,” said Addison.
The inquiry resumes on Tuesday.
