Press conference, Woy Woy, NSW Central Coast

Subjects: affordable housing development in Woy Woy, housing supply, tax reform Gordon Reid: Well, thank you all for being here today. I want to thank the Treasurer, Jim Chalmers, and I want to thank my friend and colleague Emma McBride for being here. We’re on the site of a Pacific Link housing development here on the mighty Peninsula here in Woy Woy, where we are seeing the construction of social and affordable housing through a Tier 1 housing provider, through Pacific Link, led by Ian Lynch and his team here on the Central Coast, who have provided housing for thousands of Australians here on the Central Coast.

It’s great to see this construction taking place, and it’s great to see a construction taking place that is the culmination, the collaboration, between enterprise, between state government and between federal government as well. And it’s good to see that the Treasurer is here taking an interest in the Central Coast, as he always does, because he knows, Emma knows, and this government knows how important housing is for the future of the Central Coast but also for the future of the country.

And with that, I’ll hand over to Assistant Minister Emma McBride. Emma Mcbride: Thank you so much, Gordon. It is an absolute pleasure to be here today on the Peninsula and with Ian Lynch from Pacific Link Housing, and to welcome back the Treasurer to the Central Coast, who has such a deep interest in our community.

And the Treasurer made some really important remarks at a business breakfast on the Central Coast today. The Treasurer has said that this is a budget, it is a budget for the region. I mentioned the 27,000 small businesses on the Central Coast, the absolute backbone of our local economy.

And some good news for local businesses in the Budget: a $20,000 instant asset write‑off, helping with cash flow into businesses and creating jobs. And also, for all taxpayers, a thousand dollars instant deduction, no receipts necessary. So really good news in the Budget for our local businesses.

As someone who served on the local Chamber of Commerce and was a volunteer director, and the local community bank, I know just how important this relationship and this dialogue is between the Commonwealth, between Business NSW, between the Central Coast [inaudible] and our local businesses. So, thank you so much, Treasurer, for your deep commitment to our region.

Thank you for being back on the Central Coast today and on a really important investment right here on the Central Coast. And I want to congratulate Gordon, as the local member, for his incredible advocacy that’s seen projects like this happen in our community where they’re most needed. With that, I’ll hand over to the Treasurer.

Jim Chalmers: Thanks, Emma. Well, a couple of wonderful local members here in Emma and Gordon. This is a beautiful part of Australia making a massive contribution to the national economy.

So, I’m very pleased to be back here again. Last time I was here I was talking with Ian and the team from Pacific Link. Thank you for having us here on this site, which is going to make a wonderful contribution to more housing supply in this community as part of our efforts nationally.

We’re coming at this housing challenge from every responsible angle. The Budget had a massive focus on housing, particularly when it comes to building more homes in more local communities like this one. So, every contribution to that effort is very welcome and very much appreciated.

We’ve got something like 4,300 locals on the Central Coast benefiting from 5 per cent deposits. We’ve got 34,000 locals benefitting from the government’s increase to Commonwealth Rent Assistance. But one of the really important things in the Budget was an extra $2 billion for small‑scale infrastructure to unlock more housing projects.

New South Wales gets the biggest slice of that – around $600 million – and a quarter of that is reserved for regions like this one. That’s because we know that housing supply is the main game. The problem begins, when it comes to housing, with housing supply, and that’s why we’re investing billions of dollars in local communities to build more homes.

We also know that when it comes to housing, it’s been too hard for too long for Australians, and particularly young Australians, to get a toehold in a really difficult market. And that’s one of the motivations for the tax changes in the Budget as well. Our tax changes are all about making it easier for people to buy their first home.

It’s about cutting taxes for workers, and it’s about better aligning the tax treatment of labour and asset income so that we can make the tax system fairer. And in that respect, I’ve got some new numbers today that I wanted to share with you from the Treasury, analysing the most recent ATO data. And what it says is that just 0.2 per cent of tax filers earned around 60 per cent of all net capital gains in the most recent data.

That 99 per cent of tax filers earned only 13 per cent of all net capital gains. Now, this is particularly relevant when it comes to young people in our economy. People under 35 make up around a third of all tax filers, but they got just 6 per cent of dividend income from shares.

And those same under‑35s got more than 80 per cent of their income in the form of salaries and wages, less than 2 per cent of their income came from dividends. We are making the tax system fairer for young people by cutting their income taxes and making it easier to buy their first home. Now, this unfair tax system, this broken status quo when it comes to housing, is being defended by our political opponents.

Whether it’s One Nation, the Liberal Party or the National Party, they think that everything is absolutely fine in the housing market. We know that the status quo is broken in housing. We know that the problem lies at the intersection of the housing market and the tax system, and that’s why we are taking difficult, contested and contentious decisions to address these challenges in our communities and in our economy.

Whenever you’re delivering real change, whenever you’re delivering economic reform and particularly tax reform, it will be controversial, it will be contentious, it will be contested. But it will be worth it, because what it means is more young people getting a toehold in the housing market, it means more tax cuts for workers, it means a fairer tax system all around.

With that, happy to take questions. Journalist: Treasurer, how do you think any of the tax changes will improve Australia’s economic growth rate? Well, a couple of important things about the Budget.

First of all, there’s a productivity package in the Budget which will cut compliance costs in our economy by more than $10 billion a year and make it easier and faster to build more homes. When it comes to the tax package in particular, there’s almost $4 billion now of tax incentives for business, particularly for small businesses, whether it’s the instant asset write‑off that Emma referenced, the loss carry back, and other incentives as well.

When it comes to capital gains, what we saw when a big policy mistake was made in 1999 by the Howard government is that it over‑compensated investment in established detached housing and under‑compensated other kinds of investments, including in regions like this one. And so, what we’re doing is we’re addressing a distortion in the tax system which funnels investment into detached housing at the expense of investment in other areas.

So, our tax changes are about encouraging people to make investments for good economic reasons, not just for tax advantages, and that will benefit the economy. Journalist: Treasurer, can you please clarify your statement that 98 per cent of small businesses will have access to the GST carve‑out – the CGT carve‑outs you announced yesterday, despite the increase in turnover to $10 million, the exemption is not going to be extended to businesses with assets above $6 million, which is the existing setting.

So, will that reduce eligibility? Well, there are 4 existing concessions and carve‑outs in the CGT system for small business, and we’re maintaining all of them. And we’re extending and making more generous the most important one, which is the turnover threshold – taking it from $2 million to $10 million.

What that means is that every single one of the 2.7 million active small businesses in our country will have access to that really important CGT concession. It means they get the indexation plus a 50 per cent discount on top of that. That is the most important one when you’re trying to cover the greatest amount of businesses – 100 per cent of active small businesses will get that concession, and 98 per cent of active businesses overall.

There’s been some very supportive comments from the NFF as well – the farmers federation – today, because they recognise, as we do, that the next steps that we detailed yesterday, the implementation details that we set out when it comes to the threshold, the turnover threshold for small businesses means that overwhelmingly businesses in this country will be able to access the most important of those 4 concessions, and we’re maintaining the others.

Journalist: On the capital gains tax announcement, is this a backflip? And I know you’ve been asked this all morning, but if you backflip on one thing, can you guarantee that you won’t backflip on another policy again? The next steps that the Prime Minister and I announced were all about providing clarity for investors, more support for small businesses and more incentive for innovation.

We said on Budget night, we said privately before the Budget, that we would consult on the implementation details as they relate to start‑ups. We’ve said for some weeks now that we’re engaged with the small‑business organisations and representatives about the turnover threshold for the CGT concessions. And what we announced yesterday, the next steps that we laid out yesterday, are entirely consistent with the consultation process that we laid out in the Budget papers themselves.

What this shows is that the consultation has been meaningful, it has been genuine. Now, it’s not unusual at all for a government of either political persuasion embarking on significant tax reform to consult on the implementation details and to legislate the tax changes in pieces, and that’s what we’re doing. Journalist: Have you secured the support of the Greens to get this through the Senate before the end of the winter break?

Look, I’ve learned not to pre‑empt outcomes in the Senate until the final votes are counted. But obviously we’re engaging with the crossbench in the Senate in recognition that nobody has the numbers on their own in the Senate. We need the support of other parties in order to pass this really important legislation.

So, we’ve been engaging with the Greens on these proposals. We’ve also flagged yesterday some of the next steps that the PM and I outlined when you and I were in Sydney talking about these things, that we will seek to make some amendments to that legislation when it’s before the Senate in the next fortnight to reflect some of these landing points that we’ve reached, including when it comes to the small business turnover threshold.

Journalist: So, a lot of small‑business owners at the breakfast you attended this morning who initially had indicated that they weren’t happy with the Budget, what was the response that they gave you and the feedback in the room after the changes were announced? Business NSW has put out a very supportive statement, and I think in the room this morning there was recognition that the government was doing the consultation that we flagged and that what we are seeking to do here, and what we are doing here, is providing more clarity for people, providing more support for small business, which recognises the absolutely crucial role that they play in our economy.

Small business people know, and the small‑business community knows that the government is maintaining all 4 of the concessions for small business. And we’re making one of them much more generous now by substantially increasing the threshold, and that was recognised by people there today. Journalist: And just lastly, Treasurer, there’s been a bit of commentary this morning about your, quote, ‘frosty’ relationship with the Prime Minister.

What do you make of this commentary? Oh, it’s just rubbish, you know, and you shouldn’t believe that sort of trash that you read in some parts of the media. Now, I’ve talked to the Prime Minister almost every day since the Budget.

We work together very, very closely. On a personal level I’m very grateful to him for the work that we are doing together to bed down these really important changes. You know, as I said this morning on radio and I’ve said on other occasions, we know these changes are politically difficult, but we would rather do the difficult thing politically if it means getting to the right outcome, particularly for young people locked out of housing, particularly for workers who need the tax cuts that are before the Senate right now, which our political opponents oppose.

And so, the Prime Minister and I have decided, and the government has decided collectively, to make these difficult changes, even though they are contested, even though they are contentious, even though they invite the usual scare campaigns and partisan campaigns in some of our newspapers. These changes are more important than the political commentary and the week‑to‑week polls because, at the end of the day, this is really about making it easier for people to buy a home, it’s about cutting taxes for people, it’s about supporting small business and making the tax system fairer.

And those objectives are much more important than the political commentary from day to day. Thanks very much.