Interview with Sarah Ferguson, 7.30, ABC

Subjects: CGT concessions for small business, gas tax Sarah Ferguson: Treasurer, welcome. Jim Chalmers: Thanks very much, Sarah. You’ve increased the threshold for businesses exempt from your CGT changes.

Were you forced into this back down by the backlash to your Budget? No, this is consistent with what we’ve said on Budget night and ever since, that we would consult on the implementation details of these ambitious changes. I don’t think you said – I don’t think you said you were going to change the threshold of businesses, exemption for businesses.

We’ve been saying for some weeks that the small business representatives have put to us that the threshold was too low. I said on multiple occasions that I took that view seriously, and you can see the outcome of all of that consultation today in the announcements that we made. Those announcements that we made today, the next steps in our tax reform agenda, are all about providing more certainty for investors, more support for small business, and also more incentives for innovation.

But you talk about consultation, but what we really experienced over the last few weeks is the backlash to the Budget. This was supposed to be a bold move, broken promises but at least in return you would get some credit for seeking to address the housing affordability crisis in Australia. What we’ve seen instead is an enormous backlash from business.

That can’t be what you wanted. No, but it’s what we expected. Whenever there’s significant economic reform in this country, and especially tax reform, that’s contested, it’s contentious, but it’s worth it because we are making it easier for first home buyers.

We are cutting taxes for workers again and again. And we’re better aligning the tax treatment of labour and asset income. Now of course there will be people who prefer the existing arrangements to stay exactly as they are, but those existing arrangements, that broken status quo hasn’t been working for too many Australians, and particularly young Australians in the housing market.

And that’s why we have chosen the harder road of reform rather than the political path of least resistance. We expect that people will have views about that, but we said on Budget night, we’ve said ever since, that it’s entirely normal when you’re implementing big, ambitious tax reforms like we are, that there is consultation on the implementation details. We’ve been doing that in a genuine way and in good faith, and we announced some of the outcome of that consultation today.

Businesses are still not satisfied with where you’ve landed on the CGT changes. Could you still go further, offer further concessions? Well in terms of the turnover threshold, the $10 million turnover threshold that was $2 million, we consider that to be the landing point.

We’ll try and legislate that in the primary legislation in the next fortnight. Because what that means is something like 98 per cent of all active businesses will now have access to those carve‑outs and concessions, and in fact every single one of the 2.7 million active small businesses will get those concessions and carve‑outs. And so that is a very good outcome for small businesses.

It recognises the big contribution that they make to the economy, and it shows that the consultation that we’ve been doing has been real and meaningful. You’ve announced today the types of businesses that are going to be included in those carve‑outs, essentially, and tech and medical tech start‑ups, but why wasn’t that work done ahead of the Budget? Is it because the plan to extend CGT changes beyond housing came so late in your preparations?

No, that’s not the case. I mean we did some private consultation before the Budget was announced, but it’s not possible to conclude that properly before you make it clear publicly, the changes that we are proposing. And so we put in the Budget papers that we’d be consulting when it comes to start‑ups.

We do – You put a short paragraph in the Budget papers. It looked hurried, like something that had been inserted at the last minute. No, you shouldn’t conclude that.

You know, Scott Farquhar, for example, who’s a very substantial figure in the tech community, has said that we were in proper discussions with him before the Budget was handed down. We put it in the Budget deliberately as a place holder because we knew that more consultation was necessary. We do recognise there’s a different cost base calculation when it comes to start‑ups, and that’s why what we’ve put out there today is a consultation paper.

There’ll be more discussions with the various sectors. It is actually sector neutral, but it’s got a series of tests around how long you hold the shares for, the value of the company, a genuine innovation test, and things like that. There is a question I want to go to which is about how you formulated these decisions.

As I say, they were significant broken promises. You took a massive political risk. Did you need the extra revenue because you made a decision to walk away from a popular gas tax because of the situation in the Straits of Hormuz?

No, I wouldn’t put it the way you’ve just put it to me, and every dollar of the money that we raised over the forward estimates is returned to workers and small businesses in the form of tax cuts, and so it’s revenue neutral over the forward estimates and we’ve made it clear that when we can afford to provide even more tax cuts for workers beyond the 5 tax cuts that we have already budgeted for, then obviously we will look to do that.

So it’s not about revenue, and it is a difficult reform, I mean – You say it’s not about revenue. The head of the Treasury department, Jenny Wilkinson, said with admirable bluntness in a recent speech, revenue has to come from somewhere. So it is about revenue.

Well that’s a statement of fact. I mean we have to fund the health system. We have to fund the NDIS and other important social services in this country.

I think that’s just Jenny Wilkinson making a statement of fact. The point that I have made in the Budget, subsequently and again today, is when you look at the 4 budget period, we’re returning all of this, to workers and to small businesses. There’s almost $4 billion now in support for businesses.

There’s the fourth and fifth tax cut for workers in this Budget as well. And that’s because what we’re trying to do here is better align the tax treatment of asset and labour income. That has gotten out of whack over time.

You’re asking me is it politically contentious? Is it politically difficult? Of course it is.

You wouldn’t be making changes of course if there hadn’t been a backlash. You said today that the cost of these changes will be about $475 million over 4 years. That’s out of $8 billion that these changes are going to accrue to the budget.

It’s not a great deal of money. Could you go further and offer more concessions? Well we’ve got a genuine consultation on start‑ups and so I don’t want to pre‑empt the outcome of that.

But the changes or the details that we’re announcing today, the next steps we’re announcing today, you’re right to say would be about $475 million, that’s about one‑seventeenth of the package. And again, you know, we made it clear that in these consultations there would be details that we would settle over time. There are still more details to settle as well.

But where we can make, provide more certainty and more clarity, including by putting some of this in the primary legislation in the next couple of weeks, of course we’ll seek to do that. The business community supported you making tax changes to alleviate intergenerational inequity at the time of your productivity roundtable, but they did so on the proviso that those changes should also help bolster business investment, is what they all said leaving your roundtable.

These changes increase the tax burden on Australian business. So on that measure you failed. No, there’s $3.5 billion, now almost $4 billion in tax cuts for business.

Loss carry back, the instant asset write‑off, the refundability of losses, the incentives for early stage venture capital, the reforms to the R&D tax incentive – But still – – billions – – businesses still will be paying more tax than before. You asked me whether this package would help to fund tax relief for business. It does.

Almost $4 billion in tax relief for business, in addition to the tax cuts for workers as well, and that’s because we are tilting the balance back in favour of workers or trying to better align the tax treatment of workers and people who earn their income legitimately from assets. And it was a big part of the discussion at the reform roundtable that I convened almost a year ago now.

Now again, I respectfully understand that some of these peak organisations would prefer a different model. In some cases they would prefer that we leave the existing arrangements in place. But, you know, there are so many different ways that this status quo is broken.

You and I have spoken in very recent times about how there is this big risk in our society of people feeling disconnected and disregarded, in our economy and in our society more broadly – But isn’t that – – and I think one of the things that’s driving this is this sense that young people can’t get a toehold in a difficult housing market, and so that’s where these motivations begin, and having taken the decision to do that, you’ve got to apply these changes broadly and fairly and that’s what we’re doing.

Now the situation may be resolved in the Strait of Hormuz, once fuel supplies settle down, will you return to that hugely popular measure of the gas tax, tax on gas exports? Well first of all on the developments in the Middle East, they’re very, very welcome. I mean the end of this war can’t come soon enough.

We need this ceasefire to stick. Secondly, when it comes to arrangements around gas taxes, that’s not something that we’ve been working on. We’ve been trying to bed down the changes that we have announced and really all of my time at the moment is about that.

It’s about consulting, providing the details on these next steps, implementing the very ambitious tax reforms that we’ve already announced in the Budget a little over a month ago. Promises are a devalued currency for the Albanese government post the Budget. Why should customers in the rest of Asia believe you when you say you’re not going back to the gas tax?

Look, I understand that people will level that charge against us. I mean it’s more important to us that we get the substance right rather than the politics right, but we’ve been working very closely with our Asian refining partners in order to strike these deals. One of the big successes we’ve had as a country and as a government is that we’ve been able to secure the supply.

I pay tribute – It’s off the table, going back to the gas tax is off the table. Not something that we’ve been working on. Is that the same as off the table?

Well, one of the things that you’re trying to get at, and I understand why, is you’re trying to compare this to statements we’ve made about other changes that are in the Budget. And when we come to a different view we front up and explain why we’ve come to a different view, that brings with it a political cost, that you’re right to point to in this interview.

That means commitments are all shifting sands essentially. You may say you’ve got good reasons for it, but commitments from this government are built on shifting sands. No, the point that I’m making is that we’ve announced a whole bunch of tax changes, and that’s what we’re working on implementing.

And I understand you want to ask me about subsequent budgets and all the rest of it, obviously that’s all legitimate, but for us the big focus is on bedding down these very broad, very ambitious tax changes that we have announced, and we’re trying to get it through the parliament right now. And the announcements that we made today about the next steps are really all the government’s focused on right now.

Treasurer, thank you very much. Thanks Sarah.