Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026
Ms CHESTERS (Bendigo) (18:33): No. 3 Melaleuca Avenue, North Bendigo—North Buderim. I'll say that again: No. 3 Melaleuca Avenue—m-e-l-a-l-e-u-c-a—North Buderim, for the benefit of Hansard. Why I know that so fluently as it rolls off my tongue is that that was my family home.
That was what my parents built back when Bob Hawke was prime minister. Every home in that street was built about the same time. For $45,000, my family built a home in North Buderim, a suburb on the Sunshine Coast.
When I look at photos online, it's still quite similar to what my family had. The pool is still there. It's still a three-bedroom.
We turned the carport into a rumpus room for us kids because we didn't want to watch news every minute of the day, much to my father's disappointment. The garden's the same. I can remember planting the trees in the front yard and the garden that we had, with the two sheds out the back because my father was a mechanic and he liked to repair his own cars.
That home today is valued at $1.2 million. My sisters and our friends at school could not afford to buy their family home. That is a property market on steroids.
In less than 35 years, our property prices are at a level we never would have imagined when we were kids. We are here today debating these reforms because the Australian dream for so many in our younger generation has been broken. At no time when we were kids, or when we finished high school or when we went to university, did we ever think that homeownership would not happen.
If you worked hard and you saved, you could still live in the suburb where you grew up or another suburb. These aren't just houses in Melaleuca Avenue, North Buderim, or any other house in North Buderim. This is the story of so many houses that were built in the late eighties and early nineties as Australia expanded.
It is true of the story of homes in my electorate of Bendigo and all throughout regional Victoria and the outer metros. For example, a home on Honeysuckle Street, Bendigo, in 1982 was $6,200. That was the price back then to enter the market.
In 1999, with some of the changes we're debating today, it was $79,900. Today it's valued at just under $700,000. That has been the progression of our housing market in a generation.
That is why we need to step back and think about where it all went wrong. I acknowledge that some have made a lot of money—and good on them. But to the ones who want to do what their parents did, here's a cautionary warning: it was a once off.
Your family home that was $45,000 or that was $70,000 that your parents built and then sold for $1.2 million or thereabouts, if you bought that home for $1.2 million, you're not selling it for the same mark-up. That has happened in one generation. It's a once-off opportunity where people have made some money and have done quite well, but we need to talk about nation-building policy that helps everybody.
I have another example of a more recent time in Bendigo. In my time since being the federal member, this particular home on Sternberg Street in Bendigo was sold in 2013 for $285,000. That's reasonable a decade ago.
Ten years later, in 2023, it sold for $1.1 million. That is a property market on steroids. How does somebody in Bendigo on an average income afford a home on an average street in a suburb in Bendigo?
How does a first home buyer compete with a self-funded retiree for that home? It's a beautiful home. It's been renovated.
The previous owners did a glorious job. But even they were surprised at the price tag and the windfall that they got. We're not saying that we're going to crash the prices back.
That's not what we're saying at all. We're saying that we have to address the system that has enabled this to be, to create a fairer playing field for first home buyers. These reforms before us are about helping workers, first home buyers and businesses so that more Australians can earn more, keep more of what they earn, get into the housing market and have the opportunity of the Australian dream and get ahead.
We're changing it—except for the examples that I've established—to demonstrate that we need broad tax reform to make our tax system fairer. We need to look at how we can readdress the balance that income earned on investments is disproportionately seen more generously with tax concessions than the income you earn through your labour and hard work. Currently, if you sell an asset you've owned for more than 12 months, like shares or an investment property, you pay the tax at the marginal tax rate on half of that profit.
It's known as the 50 per cent capital gains tax. The discount is meant to compensate investors for inflation so that they only pay tax on real gains. Up until 1999 the indexation was applied to capital gains so that people only paid tax on their real gain, the part of the gain over and above inflation.
In 1999, under Howard and Costello, the government replaced the inflation indexation with a 50 per cent discount, arguing it would be simpler to calculate. At the time, they thought that this would spur investment in shares and productive investments, but this was not true. As history now tells us, it encouraged more people to get into property.
Shares declined and more people invested in property. And now we've seen the situation that we're in today. The examples that I shared are examples that all of us have.
What we're proposing is to level the playing field, to encourage and to support first home buyers. People will still have the opportunity, in regard to negative gearing, if they contribute to our property portfolio as a nation by investing in new builds. What we're proposing in this change means that, from 1 July 2027, we'll see future gains taxed adjusting for inflation—rather than a flat discount.
This means that investors will only get taxed on the profits above the adjusted amount, going back to the system that existed from 1985 to 1999. The additional 30 per cent minimum tax rate will be applied to the real capital gain. This is the same as the marginal tax rate that most Australians pay on their wages.
That is the crux of this reform. Your gain—whether it be investment, property or wages that you've earned through your labour—should be taxed the same. That's what we're proposing here.
I should note—and this is a conversation that I've had with a lot of people in my electorate—that there is grandfathering involved in these changes. So if you owned a property before budget night, it won't change for you. This is about future gains and future properties.
The reason why this is important to raise is that there is a lot of mis- and disinformation out there. These aren't the only changes that are being put forward in this bill. The government's reform package before us today is also about building a better, fairer, simpler tax system by reducing the burden for income tax workers; 13 million across Australia will receive a further tax reduction.
We are delivering to them the worker bonus, the working Australia tax offset, which is a new tax cut. We're delivering a $1,000 instant tax deduction, saving time and money for millions of workers when it comes to their tax time. These are ways that we are helping workers, particularly those on the lowest income, earn more and keep more of what they earn.
The proposal that's before us today is about correcting the impact of a legacy of Howard and Costello that they made in 1999. It's about restoring hope to a younger generation so that they may be able to one day own a home, to have that same opportunity that their grandparents had and that their parents may have had. We hope that they will have that.
The changes before us limit negative gearing to residential properties that are new builds. That is incredibly important for electorates like my electorate, where we do have the opportunity to build more homes in town through infill and more towns in our growing suburbs. That is why this announcement that has been made has been welcomed by the small businesses involved in construction in my electorate.
They see any way to encourage people to invest in new builds as welcome. The government is grandfathering the change. So if you're already negative gearing or own an investment property, you can continue to do so.
The changes are also affixed to the tax treatment on capital gains so that the system operates as it was originally intended and helps direct investment to where it is most productive. And I think that's what disappoints me the most about those opposite. Acknowledge a mistake was made.
Go back to the original intent of the discount. It was about making sure that we directed investment towards investment that was the most productive. The changes that are before us are about the future.
They're about encouraging investment. They're about encouraging investors to look at where we can be the most productive and grow our economy. The distortion that's happened with the coinciding of house prices increasing at a much faster rate than wages is a long story that started back in the late eighties, as I have suggested, which was super-turbocharged in 1999 to where we're at today.
I encourage those opposite to rethink their opposition to this and to join Labor in correcting the problem that was created by a previous generation of politicians. I encourage them to support the introduction of the $250 working Australian tax offset and to support our lowest income earners to receive a little bit of offset. For those who dismiss it, for someone in my electorate, that's their kid's school fees for a primary school.
It could go towards swimming lessons. It knocks out one of those bills that they're struggling to pay. $250 can go a long way for a family on a small income.
This will benefit 13.3 million Australians and disproportionately more women, because women earn lower incomes, and people living in regional areas who are also on low incomes. This is on top of the other tax cuts that we've already legislated. Combined, the average worker will be just under $3,000 a year better off by 2028, because of our Labor government and the changes.
That $3,000 by 2028—it should be noted—has been opposed by the Liberals and Nationals every step of the way. This is real money back into the pockets of working Australians to help them pay bills. This is real cost-of-living relief to those who need it most.
These measures that are before us, as I have said, are about restoring fairness to our tax system. They're about correcting or giving opportunity to a next generation of first home buyers. These reforms are about helping workers, first home buyers and businesses so more Australians can earn more and keep more of what they earn.
They can get into the housing market. They might have the opportunity to live in the neighbourhood where they grew up or a new neighbourhood that they now call home, but it's about giving hope to the next generation and recognising that the income that they earn as a worker is taxed and valued the same as income that their landlord or the investor earns.