It critically analyses Labor’s proposed changes to the Super Tax, which is set to take effect on June 30 2026, and highlights some potential problematic outcomes.

The Albanese Government’s stated rationale is that the current framework is overly generous to high-income earners, with the Government noting that 17 individuals hold superannuation balances exceeding $100 million and that the existing concessional tax rate of 15 per cent on earnings has been used as a tax evasion strategy.

The Government proposed a plan to effectively increase the tax on earnings of super balances above 3 million dollars from 15% to 30%. The policy was framed as affecting only the top 0.5 per cent of superannuation account holders. However, critics argued that the $3 million threshold was not indexed, meaning that over time it could capture a far broader cohort, including younger Australians who are projected to accumulate higher superannuation balances by retirement.

In response to this criticism, the Government proposed a new version of the tax that would index the $3 million threshold. The article nevertheless raises a number of additional concerns about the practical and policy implications of the reform.

Anyways have a read and see what you think.

It illustrates the argument that the capital gains tax discount may be too generous, in favour of property investors over younger buyers, with the backdrop of the growing housing affordability crisis. Modelling suggests that shifting to an inflation-indexed system would increase tax for property investors but reduce it for share investors, highlighting how different assets are affected. Overall, the debate centres on balancing fairness, housing affordability, and government revenue, with any reform likely to create both winners and losers.

https://www.afr.com/policy/economy/shares-v-property-who-wins-if-jim-chalmers-dumps-the-cgt-discount-20260209-p5o0oe

It serves as a practical follow-up to our introductory discussion, showing that when tax law struggles with clear categorisation, it creates real-world distortions in consumer behaviour and market pricing.

The proposal to abolish the CGT discount (the “Proposal”), at least with respect to its aim of improving housing affordability as suggested by the attached news article, engages the criteria of economic efficiency and equity.

With respect to economic efficiency, the Proposal appears to have the effect of increasing the amount of CGT payable by real estate investors. With my limited understanding of economic theory, such an increase would lead to economic inefficiency if it were to be viewed independently. Further, the Proposal would not only impact real estate investors but also investors in general. With some vibrant capital markets such as Hong Kong and Singapore having no capital gains tax, there may be an adverse impact on the amount of foreign investments.

On the bright side, the proposal could improve equity in terms of housing affordability. The “Demographia International Housing Affordability 2025” report published by the Center for Demographics and Policy of Chapman University has identified the top 10 most unaffordable housing markets. In my observation, all these markets are within jurisdictions with no CGT (or similar tax) or with CGT discount (or other CGT benefits applicable for long-term investments). The Proposal may indeed lead to more affordable housing in Australia, noting however that housing affordability depends on a large number of factors. (Link to the abovementioned report: https://blogs.chapman.edu/demographics-and-policy/2026/02/16/latest-publications-and-reports/)

The discussion above only concerns the trade-off between economic efficiency and equity. There are also other considerations worth taking into account when assessing the feasibility of the Proposal. A relevant consideration could well be the history of CGT (see, for example, [6.1] of the textbook) as to maintain policy consistency.

Australia has considered doing this a couple of times, but we haven't got there. Don't even know if you can objectively measure unrealized capital gains for all assets.

BTW - Did you see my last post here? It seems to have disappeared.

Australia has various potential death taxes:

1. Summons for Probate: This depends on the gross value of the estate, reaching $7,099 for estates of $5m+ in NSW. https://supremecourt.nsw.gov.au/documents/Forms-and-Fees/FEES/Fee-Schedules/Fees-1-July-2025.pdf

2. Superannuation: A lump sum superannuation death benefit paid to a non-dependent adult child is subject to a 17% or 32% tax (including the Medicare levy), depending on the super components involved. This drops to 15% or 30% if your Will directs it to be payable to the Estate or personal legal representative, which is why filling out a binding death benefit nomination form with your superfund is important.

   https://legalconsolidated.com.au/super-death-tax/?srsltid=AfmBOoqZZnCihwlsZZB0Egq334vsoxI1Kr3MTzSV28ClYYgIP-mzEkrL

3. Stamp duty: For example, if one sibling buys out the others, stamp duty may be payable on the transfer, subject to concessions.

4. Capital Gains Tax: You must sell/dispose or move into the deceased’s primary residence within two years. Otherwise, the property's value at the date of death becomes the new cost base, and you will owe CGT on any subsequent gains.

   https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/inherited-assets-and-capital-gains-tax/how-cgt-applies-to-inherited-assets

5. Income tax: If the deceased estate earns income (e.g. rent or dividends) before the assets are distributed, the estate or beneficiary may pay income tax on those earnings and file a final tax return.

Beyond these established costs, new regulatory shifts are threatening to add even more weight to the burden.

Draft Tax Determination TD 2026/D1 has just been released and is open for public comment until 27-02-2026.

https://www.ato.gov.au/law/view/document?docid=DXT/TD2026D1/NAT/ATO/00001

In summary, it outlines the ATO’s view on the meaning of the right to occupy the dwelling under the deceased’s will.

I found this article below particularly interesting. https://www.accountantsdaily.com.au/tax-compliance/22115-tax-office-imposes-death-tax-on-family-homes-by-stealth

Despite little publicity, the ATO’s characterisation of a testamentary trust as ‘separate and distinct’ from the deceased’s Will may have future consequences for this beneficial structure.

In response to the ruling, democrats and corporations have begun pushing for refunds of the tariffs paid prior. FedEx announced yesterday that they were bringing legal action to demand a refund of their share of the total estimated $175 billion in levies paid as a result of this illegally enforced tariff regime.

This then begs the question of whether corporations will pass down any of the reimbursements to the consumers, which the Democrats are encouraging them to do.

1. Regarding royalties, we spoke about how the ATO (and the courts) often take into account substance over form when characterising a transaction. In Federal Commissioner of Taxation v PepsiCo Inc & Anor [2025] HCA 30 ('PepsiCo'), we saw the ATO attempt to characterise payments for beverage concentrate as a royalty. Summarising the facts on a high level, the case concerned an agreement whereby money was exchanged for beverage concentrate. The ATO's primary argument was that the true nature of the agreement was that money was being exchanged for both the beverage concentrate and the rights to use the Pepsi recipe (their intellectual property) which would allow them to turn that concentrate into the bottled product. This is because concentrate on its own is considerably less valuable if the buyer has no way to transform it to a readily sellable product (using the recipe). The HCA found that the transaction was not a royalty, and further rejected the ATO's argument that the companies had deliberately excluded the word 'royalty' from their contract to avoid tax (thus thwarting the ATO's attempt to impose diverted profits tax). This finding clarifies the legal boundaries around the ATO's substance-over-form approach, thus constraining the Commissioner's attempt to broaden the definition of 'royalty' to expand its revenue base.

   
   

2. Separately, our discussion of the allocation of income to a related entity (Myer case) brings up issues which were brought to the High Court in Bendel. The High Court is expected to deliver its judgement on this in the coming months. https://www.accountantsdaily.com.au/tax-compliance/21837-high-court-hears-bendel-appeal . Less relevant case but interesting to see the outcome.

Interestingly however, this protection did not extend to spirits. As of THIS MONTH, the cost of spirits increased to $108/L. This contradicts other government efforts to foster 24 hour cities, including the lifting of lock-out laws, raising interesting questions about the intersection between tax, policy and broader social/cultural debates.

So here we are seeing a discrepancy in how different types of alcohol are being treated from a policy perspective. This compounds our already complex tax system for alcohol - spirits are taxed based on their alcohol content at a much higher rate than beer and wines. This decision has been criticised by the spirits industry for creating a "two-speed" system that favours brewers over distillers and pubs over bars.

In Week 1, we were asked about the relationship between tax and social justice, and I think this policy invites interesting reflection.

The protection of beer prices reflects a deliberate endorsement of the pub as a cultural institution in the Australian social imaginary. Supporting pubs during our cost-of-living crisis therefore aligns tax policy with our cultural values and with employment in a sector that functions as both an economic and social hub. At the same time, broader efforts to foster 24h cities suggests a recognition that vibrant nightlife, including bars and clubs, contributes to urban vitality, tourism and small business growth. Supporting beer/pubs may indirectly stimulate other alcohol segments by encouraging people back into nightlife precincts.

However, the arguably discriminatory nature of this relief raises short-term concerns of competitive fairness. There is also the social consideration that tax concessions which make alcohol cheaper misaligns with public health objectives, including responsible service of alcohol, harm minimisation and reducing alcohol-related violence. If tax policy that signals affordability is prioritised over harm reduction, it may gradually erode the normative force of alcohol safety frameworks.

Interestingly, Phillip Coorey (Editor for the Article) starts with a quip about how a CGT discount of 33% (as is being considered by Treasury), would only serve the intention of Treasury, to raise sufficient revenue, if it was applied retrospectively. Insiders say however, that if the CGT discount was to decrease to 33% and it was to retrospectively apply, the $5 billion would be an effective wealth redistribution to allow for the $5 a week top-up tax cut legislated to begin on July 1, and then topping this up to $10 a week. This is looking at the equity of the CGT discount so that any increased revenue can be used to increase the equity of ordinary income tax relief.

Following from our discussions today as well, I think in light of the article, and Treasury's considerations, it is telling that we mainly considered CGT in the context of a sale of property. This is since Coorey reports that insiders state that the Albanese government is only thinking of changing the CGT discount's application for housing investors.

More discursively, Coorey voices Ken Henry's understanding of the Greens-led Senate inquiry into the Howard-era tax break. He reminisced on the suggestion for a 40% discount and that the rate applies to all capital income (rent, interest, trust dividends, etc.). Henry considered that the top marginal tax rate should decrease and that retrospective application should occur to avoid grandfathering.

Coorey also reported on what we discussed today in class, namely the inflation model. He reflected on Michael Brennan's (from e61 Institute) comments on the inflation model, noting that it would provide more revenue to use that model and that in any other case, the effect is minimal, so it might as well just stay at 50%, since it is close to their ideal benchmark. This raises questions on what should prevail in this form of tax design - should it be simplicity, should it be equity, or should it be both. Brennan contends that modern technology should allow for the complexities to be somewhat eliminated, therefore meaning that the more equitable approach would be helpful.

The alternative position of Jacob Caine from the Real Estate Institute of Australia was considered. Caine held strongly that tax policy should be neutral and predictable, and that the reforms in question could dampen investment, limit rental availability and place further pressure on rents, ultimately worsening the landscape for young people.

Senator Gallagher's comments effectively sum up the mentality on CGT changes: The Government is trying to make sure that younger people can buy their own home and to do so, all levers must be pulled. The Government is still looking at all options, so watch this space!

During construction, the developer pays costs, including payments to the builder, while claiming tax deductions for construction costs each year. However, pursuant to the contract, the developer does not invoice the landowner progressively (even though it could), but instead income is recognised only at the end of the project.

This results in ‘artificial tax losses’ that are then potentially used to offset other income in the group or reduce tax payable elsewhere. Essentially, the landowner and developer can deliberately coordinate the timing of income across the broader economic group or other development projects, resulting in minimal to no tax being paid.

The ATO stresses that in these arrangements, there is really only one single business activity, and the companies are being artificially separated to create tax advantages. The ATO has declared that this may trigger Part IVA of the ITAA36 which is Australia’s general anti-avoidance rule, and has warned that serious penalties may apply to participants or promoters of this type of arrangement.

From a legal perspective, the capital gain tax discount and negative gearing are discussed. As I remember, around 1985, the government paused negative gearing for one or two years. At that moment, the house owners transfer their loss from negative gearing to the tenants, which puts significant pressure on rents. With high rents, the housing crisis worsened.

The discussion demonstrates that the tax reform requires legislative drafting to amend tax provisions. Even minor wording changes may alter taxpayers' rights and liabilities.

The article raises the policy question of whether concessional treatment of capital gains aligns with principles of fairness, especially when wealth accumulation significantly outpaces income growth for ordinary taxpayers. This illustrates our discussion on how technical tax rules, like the CGT discount, are inseparable from broader social justice and redistribution debates.

Nevertheless, a cautious approach to reform is warranted. If amendments to these concessions were to materially reduce housing supply, there is a risk that affordability pressures could be exacerbated rather than alleviated.

However, Treasury evidence indicating that proposed reforms would largely result in a reallocation of housing stock from investors to owner-occupiers calls into question the characterisation of negative gearing as a supply-enhancing mechanism. If its primary effect is instead to stimulate demand, the normative basis for its retention as a housing policy tool becomes less persuasive.

Reflection based on a broader tax policy perspective implies that the principle of neutrality is engaged. The current settings appear to favour leveraged investment in residential property over alternative, potentially more productive forms of capital deployment. This raises a legitimate concern as to whether the tax system is distorting capital allocation in a manner that undermines overall economic efficiency.

Tax experts argue that Australia’s 47% top marginal tax rate strengthens incentives to use negative gearing and the CGT discount, making property investment particularly attractive to high-income earners.

Some suggest that lowering the top rate, rather than targeting property concessions alone, could reduce these distortions.

However, others warn that scaling back tax incentives may affect rental supply and housing affordability.

The article highlights how income tax settings interact with property tax concessions, suggesting that reforming marginal tax rates may be as important as adjusting negative gearing or CGT rules.

It raises broader questions about whether Australia’s tax mix unintentionally favours asset accumulation over wage income.

As I stared, puzzled, at the line of soon-to-be-gold-owners, I recalled an offhand comment made in a Week 2 discussion about Capital Gains Tax; a joke made about how you can always just hide gold under your bed. Seeing a throng of eager antiquarians returning to the purchase of shiny metals, I began to wonder whether that was indeed the case. After all, is buying gold not like buying any other jewellery? Or, for that matter, any random item? What is the difference between gold and say, the metals used in your refrigerator?

After some digging, Mark Chapman gave me a clear, unsurprising, but perhaps disappointing answer: Capital Gains Tax applies in Australia to the sale, gifting, or transfer of gold and silver (at least, at a glance). Similarly, the GST discount applies to those precious assets; individuals and trusts being eligible for 50% off said CG if they deign to hold the gold for at least 12 months. (See Part3-1 of the ITAA97)

As if to answer my classmates earlier comment, Chapman goes further to clarify that it is, in fact, a bad idea to hide gold under your bed. Chapman declares that "The ATO can also know more than many investors expect"" possessing the power to conduct a 'lifestyle audit'. Namely, where the ATO suspects that a persons standard of living is so different to their reported income that there is a potential tax evasion, The ATO may look at their insured items, social media, business expenses, amongst other things. In a practical sense, what this means is that by hiding the gold bar under your bed and skimping out on CGT, you can face significant fines, criminal convictions, and even imprisonment for up to 10 years if the ATO finds you guilty of tax crime.

Before wrapping up, I wanted to address one last important concern of Chapman's, to comfort any anxious readers. There is a 'personal use asset exemption' for precious metals, meaning that the silver bracelet you got for Christmas is likely considered by the ATO to be outside the scope of CGT. However, the burden of proof remains with the taxpayer; so if you stole Empress Marie-Louise' necklace from the Louvre, you'll need to start wearing it soon, or the government may suspect it to be an investment piece, rather than an exempt personal use asset.

A few key takeaways,

1. Gold and Silver ARE subject to Capital Gains Tax.

2. You incur a serious risk by hiding gains on bullion, noting substantial ATO audit powers.

3. Personal use assets likely fall outside the scope of CGT; even if they are comprised of precious metals.

This is not tax advice.

The case could be relevant to the content covered in week 2’s lecture as the decision practically engages the topic of assessable income, which is best addressed in an insight from KWM: “The Court’s decision in Bendel also gives rise for the opportunity to consider amending prior returns if a taxpayer applied the Commissioner’s views and included a deemed dividend in their assessable income by reference to a UPE. This also provides more flexible capital funding opportunities going forward for private groups”(https://www.kwm.com/au/en/insights/latest-thinking/commissioner-of-taxation-v-bendel-2025-fcafc-15-upes-are-not-loans-for-division-7a-purposes.html).

It is noted, however, that the High Court’s judgment is yet to be delivered.

From a tax equity perspective, the current negative gearing and capital gains tax discount arrangements tend to allocate benefits towards taxpayers with greater investment capacity, particularly high-income earners and those holding multiple properties. By contrast, younger Australians, first-home buyers and lower-income groups are less able to directly benefit from these tax concessions, while facing higher housing prices and rental costs in the market.

I also consider that framing housing affordability primarily as a tax concession issue may understate the importance of structural supply constraints. If reform efforts focus solely on winding back tax incentives without simultaneously addressing land-use planning, construction capacity and infrastructure provision, their impact on housing affordability is likely to remain limited.

This article is relevant to our studies of understanding mechanisms of tax distribution. In particular, it demonstrates different methods of tax revenue being shared within a state. It also explores the legal and policy complexity behind distributing a broad-based tax like GST as well as issues of constitutionality and the power of State governments. 

The piece suggests that some arguments for reform view existing CGT concessions, such as discounted taxation on investment assets, as contributing to wealth disparities.

In this view, younger people may face disadvantages due to rising housing prices and lower asset ownership rates, while older generations may have benefited from earlier periods of property price growth and favourable tax settings.

However, the article also notes that intergenerational equity is complex and does not necessarily imply that policy gains for one generation must come at the expense of another. It cautions against framing the issue as purely zero-sum, and instead highlights broader structural factors affecting affordability, such as housing supply, market conditions, and economic growth.

However, if the changes are implemented, a reduction in the CGT discount could significantly affect property investors and long-term investment strategies. This demonstrates the tension in Australian tax law between encouraging investment and promoting equity.

Australians pay a flat fuel excise every time they purchase fuel, an amount which is adjusted twice a year in line with the CPI. This amount currently sits at 51.6 cents per litre. Fuel tax credits provide businesses who have purchased fuel for their business with a tax credit for the amount of tax that was included in the price of the fuel. Fuel used in business activities includes fuel for heavy vehicles, machinery and equipment. The excise primarily benefits those in the mining, transportation and agriculture sectors whilst costing our taxpayers - in fact, the scheme is one of the 20 biggest expenses in the budget.

The fuel tax credits essentially mean that large companies operating in these sectors pay significantly less to burn "dirty fuels" including diesel and petrol than households would. There are many social and environmental reasons why this is controversial. One key reason is that it undermines the Australian Safeguard Mechanism, a climate policy that regulates greenhouse gas emissions for Australia's largest industrial facilities, requiring them to reduce their emissions in line with Australia’s emission reduction targets of 43% below 2005 levels by 2030 and net zero by 2050. Yet, this scheme makes it more economically efficient for these companies not to reduce their emissions.

There have been further criticisms from the government's Climate Change Authority (CCA) and the OECD, essentially condemning the policy for supporting fossil fuels. At the Australian Financial Review summit last October, Matt Kean, the chair of the CCA stated it was "insane" miners were receiving such a rebate when the money could go to helping consumers shift away from fossil fuels to renewable energy and electric vehicles. The OECD has further requested that the Australian goverment to "reduce or eliminate" exemptions for off-road vehicles and on-road heavy vehicles.

This is a debate that has been occurring for a while, but has recently gained attention as the Labor Environment Action Network launched a campaign to push the Treasurer, Jim Chalmers, to cap the rebates for major companies. Other stakeholders are pushing for the scheme to be scrapped; however, it is likely a compromise may be necessary. It will be interesting to see the parties' positions come the next federal election.

The article argues that this discount, together with negative gearing, makes property investment more attractive and mainly benefits wealthier taxpayers. Because of this, some people believe CGT reform could make the tax system fairer and reduce excessive investor demand in the housing market.

However, the article also explains that the actual effect on house prices would likely be modest. Most modelling suggests that even significant CGT changes would only reduce prices slightly, and the impact would depend heavily on how the reform is designed. Overall, the article shows that CGT is not only a tax issue, but also an important policy debate about fairness, investment incentives, and housing affordability.

This article summarises competing perspectives presented to a parliamentary committee reviewing the discount. Some commentators argue that the concession should be reduced or reformed because the current tax mix places a greater burden on labour income compared with capital income, raising concerns about fairness and intergenerational equity. Others argue that removing or reducing the discount could discourage investment, particularly in housing, potentially reducing rental supply and increasing rents. Therefore, the debate reflects a broader tension between tax equity and economic incentives.

This discussion directly connects with the Asprey Report from this week's readings, which originally recommended introducing a capital gains tax in Australia. The Asprey Committee argued that failing to tax capital gains undermined the equity of the tax system, because individuals receiving income through wages were taxed while those deriving gains from capital appreciation could escape taxation. The Committee also highlighted issues of horizontal equity (taxpayers with similar economic capacity paying different tax depending on the form of income) and vertical equity (wealthier individuals benefiting disproportionately from untaxed capital gains).

In many ways, the contemporary debate about the CGT discount reflects the same policy concerns identified by the Asprey Committee in 1975. Advocates of reform argue that concessional treatment of capital gains continues to privilege capital over labour income, potentially exacerbating inequality and distorting investment decisions, particularly in housing. Conversely, critics emphasise efficiency concerns similar to those acknowledged by Asprey, arguing that changes to CGT could affect investment incentives and market behaviour.

In sum, this article demonstrates how CGT remains a contested element of Australia’s tax system, balancing competing objectives of equity, efficiency and revenue. The persistence of this debate also illustrates the lasting influence of the Asprey Report, which framed the fundamental policy rationale for taxing capital gains but recognised that implementing such a tax would inevitably involve complex trade offs for all.

The article shows that CGT is not just a technical tax rule. It also affects investment behaviour, wealth distribution, and the housing market. Supporters of reform believe that removing the discount could reduce unfair tax advantages for investors and make the system more equitable.

However, the article also notes that Treasury believes the direct effect on housing prices and supply would probably be small. Overall, the article suggests that CGT reform may help address inequality, but it is only one part of the broader housing policy debate.

In line with week 3's content, Bill Kelty warns that the reduction of capital gains tax for investors in tandem with income tax with the awareness it will impact younger generations the most.

The Tax Institute argues that the ATO’s interpretation is too restrictive, because it focuses heavily on the technical wording of the will rather than the substantive rights created by it, particularly where those rights arise through testamentary trusts.

In my view, while taxes on inheritances can serve a broader social purpose of promoting wealth redistribution, narrowing the scope of the main residence exemption introduces uncertainty for taxpayers. The change is also unlikely to generate significant revenue for the government, given that the exemption may still be obtained through more careful drafting of a will.

Grandfathering means new rules would only apply to future investments, leaving existing assets under the current 50 per cent discount. While this is politically easier, it effectively benefits older investors and leaves younger or new entrants facing a higher tax burden, reinforcing intergenerational inequality.

Retrospective changes, though always politically unpopular, would apply new rules to gains realised after the reform, regardless of when the asset was purchased. This approach aligns more closely with principles of fairness, as the CGT event occurs at the point of sale. Without retrospective application, the tax system risks entrenching advantages for long‑standing holders and failing to meaningfully address inequities between generations. Or perhaps Gen Z’ers should just have been born 30 years earlier.

There are many factors contributing to housing unaffordability, and I am of the view that the abolition of the CGT discount would have only a limited effect on housing affordability. Instead, I think the Federal Government should consider alternative measures.

As addressed in week 3’s lecture, the CGT discount is governed by Division 115 of the ITAA 1997. Personally, I think the Federal Government should consider:

1. amendments to Division 115 of the ITAA 1997;

2. taxes imposed at the State level (stamp duty, land tax and any surcharges); and

3. non-tax measures

to improve housing affordability.  

From a young person’s perspective, particularly for those trying to enter the housing market for the first time, the current tax system can feel unfair. Many young buyers struggle with rising house prices while investors benefit from tax deductions and capital gains concessions. In this sense, reducing the CGT discount could potentially make the tax system more balanced and reduce speculative investment in housing.

However, from an investor’s perspective, the issue is more complex. Property investors take financial risks and often accept short-term losses, hoping that long-term capital gains will compensate for those losses. If tax incentives such as the CGT discount are significantly reduced, it may discourage investment in the rental market.

Why is this important?

It seems that there has been a lack of public disclosre by large companies with PWC's 2025 Tax Transaparency study showing only 3.5% of large companies studied globally had published country by country data prior to the introduction of mandatory public country by country regimes.

Penalties are quite high, going up to $825k AUD for failing to comply with the deadline or correct material errors on a timely basis.

What needs to be reported?

• Entity's approach to tax and whether it is in line with Global Reporting Initiative's Sustainability Reporting Standards GRI 207-1.

• Main business activites

• Number of employees

• Revenue from unrelated parties, related parties not resident in the jurisdiction, profit/loss

• etc

In PWC's key takeaways I found it interesting that they had a section called "prepare for public scrutiny" and suggest clients to engage internal stakeholders, including the board, early, and consider self-publishing additional context alongside the report.

This article looks at how the Treasury is looking at capping negative gearing so landlords can only use it for up to two loss making investment properties at a time. Under the current system, investors can offset losses from as many properties as they own.

According to the latest tax data, out of about 2.26 million people who own an investment property in Australia, a bit over 1.1 million were negatively gearing in 2022-23. But only roughly 117,000 of them had three or more properties. That means only a small proportion of overall investors would feel the hit if the cap was introduced despite there being around 452,700 properties that may be affected.

I believe this is a change to negative gearing that is meant to be incremental as the total removal of it has been proposed in the past but has been rather unpopular despite it potentially benefitting the majority of Australians. The changes are therefore not meant to impact ordinary Australians who are viewed as having worked hard to buy an additional property and rather be perceived as going after the ultra-wealthy in society. I do think that this change is only going to be temporary with the complete removal of negative gearing being the ultimate goal and this is just the first step to get over some of the friction present in negative gearing reform discussions.

This article argues that Australia's tax system is set up for 'wealth creation', providing increased financial support for retirees and pensioners whilst effectively blocking younger residents from entering the property market and accumulating wealth. As a result, financial stress tends to be highest among younger and middle-aged Australians.

Despite the growing wealth of older Australians, the tax system has not been adjusted to reflect this. A working paper from ANU's Tax and Transfer Policy Institute last year found that "current settings increasingly favour older Australians at the expense of younger Australians".

The article goes on to discuss the increasing gap between older and young Australians, and suggests that the tax system can be reformed to level the playing field. Suggestions include lowering tax concessions, including on capital gains and superannuation, for older Australians.

Another consideration to keep in mind in future is Australia's aging population and growing aged care and pension costs. Reducing concessions on super has been suggested as a potential response, rather than increasing income tax. Overall I found this article insightful in how it grappled with themes of equity and fairness in the current Australian tax environment.

Key Changes to how super is taxed at both ends of the income spectrum:

• Support for Low Earners: The Low Income Superannuation Tax Offset threshold will rise from $37,000 to $45,000. This allows an additional 1.3 million workers to keep more of their super, potentially adding up to $50,000 to their final retirement balances.

• Higher Taxes for the Wealthy: Approximately 90,000 Australians with high-balance accounts will face increased tax rates on earnings:

  • 30% tax on earnings for balances between $3 million and $10 million.

  • 40% tax on earnings for balances exceeding $10 million.

The most positive implication is for those earning between $37-45k per year. Currently these workers pay 15% tax on their super contributions—often a higher rate than the tax they pay on their take-home pay, and the new provisions removes this tax penalty. Since women make up roughly 60% of the low-income workforce, this is expected to help narrow the gender super gap. For the average Australian, your super earnings remain taxed at the flat 15% rate.

What makes this debate interesting is how clearly it shows the behavioural impact of tax policy. The CGT discount was originally introduced to encourage investment and to compensate for inflation, but it has also been criticised for encouraging speculative investment in property, which may contribute to housing affordability pressures. Reducing the discount could change investment incentives across the economy and potentially shift capital away from property and towards other assets such as shares or productive business investment.

At the same time, the proposal highlights the trade offs involved in tax reform. While lower investor demand may ease house price growth, fewer investors entering the market could reduce rental supply and place upward pressure on rents. This makes the issue interesting because it shows how tax policy can have complex and sometimes unintended effects across housing markets, investment decisions and government revenue. As someone studying law and economics, I find it particularly interesting because it demonstrates how legal tax structures influence real economic outcomes and broader policy debates about efficiency and fairness.

Property Council Chief Executive Mike Zorbas argues that tightening property tax settings will "hammer supply" by discouraging investment in new homes and pushing investors toward the stock market. Research indicates that around 60% of Australia's two million small-scale landlords would already be financially better off investing in superannuation rather than rental properties, especially since typical rental returns sit below 3% annually. Zorbas warns that penalizing property investors will ultimately hurt the nearly 30% of Australians who rely on the rental market, further entrenching the intergenerational inequity the government claims it wants to solve.

Zorbas points out that tax settings are not the only problem. Housing affordability is also being hindered by rapid population growth, shrinking household sizes, high borrowing and construction costs, and a growing burden of government taxes, which can make up to one-third of the cost of a new home. Instead of raising taxes, the Property Council recommends broader reforms like infrastructure incentives, better build-to-rent settings, and encouraging institutional investment.

It was also argued that taxing landlords more heavily will not improve affordability and suggested the government should instead focus on releasing more land to increase housing supply and lower capital gains naturally.

government revenue as opposed to Australia's $AUD $10.6 billion in government.

revenue from LNG exports

However, at least in Australia, they pay the same taxes. In Europe for instance, they added special taxes to cover the super profits. Should we do the same? Maybe so.

The tax bill will pass the Senate this week without amendment, after Labor secured the support of the Greens. The Greens say their support is a "down payment" of goodwill in the hope Labor will pursue more ambitious tax policies in the budget. Just one thought from this news, cuz there has a way to tax avoidance is to put more salary into the super account(I don't know whether I describe is correct or not haha) and also has another way to make the SMSF. Just wondering whether Greens decision will influence this way.

A GIC is the charge imposed when taxes are not paid on time, and is used to deter late payments. GICs can be remitted by the ATO (reduced or refunded) if certain criteria are deemed to be met.

The Tax Ombudsman identified issues with the remission process, with the main concern being a lack of transparency combined with inconsistent decisions and vagueness surrounding the process. Their findings revealed that the amount of remission requests had only slightly increased, while the amount of refusals doubled. The ATO’s approach to remissions has become much stricter since 2023 without clear communication about the tightening of this approach to taxpayer or practitioners.

Ten recommendations were made to the ATO, including making the administration of the GIC process better, potentially using partial remissions more frequently, increasing consistency in decision making, and improving communications regarding decision making. The ATO has agreed with all ten recommendations: https://www.ato.gov.au/media-centre/ato-response-to-tax-ombudsmans-review-of-atos-management-of-gic-remission.

The reasoning was cited as that a balance of larger than 3 million is unnecessary for retirement, which seems as if it would hold true if you had earned enough to amass such an amount.

Concurrently, increasing the LISTO threshold for low-income earners to get more back at tax time, as well as stricter measures to prevent child sexual abusers from hiding asseets or superfund advertisment is an excellent move in the right direction.

These changes include lowering the CGT discount to 30% and reducing or withdrawing negative gearing with hopes of lowering the demand to real estate investments and consequently the bar to entry for first home owners.

This is paired with lowering personal income tax marginal rates to provide tax benefits to younger Australians who naturally earn less than older Australians.

I believe that although this sounds good in theory, there needs to be careful policy considerations and long-term planning to the consequences.

The article argues that Australia’s tax and transfer system was designed around outdated assumptions of a single-income household with a male breadwinner and a secondary earner. It highlights how, in modern dual-income families, the second earner faces stacked financial penalties when returning to work through higher marginal tax, reduced family benefits, and childcare costs. As a result, the system effectively discourages workforce participation by mothers and contributes to persistent income and retirement savings gaps between men and women.

This issue also reminded me of our first class, when we touched on Sustainable Development Goal 5 (gender equality) and how legal and tax systems can influence economic participation. Although tax rules are often framed as neutral, the article suggests they can produce gendered outcomes when they interact with social structures like caregiving responsibilities. By shaping incentives around labour participation, the tax system plays an important role in either reinforcing or reducing gender inequalities.

It also relates to our discussion of equity as a key criterion of a “good” tax system, which requires that the burden of taxation be distributed fairly across taxpayers, and how to strive for “second best” in a way that may address broader social concerns. 

If the current system disproportionately discourages mothers from working or disadvantages dual-income households, it raises questions about whether the system satisfies the equity objective and whether tax reform could be used as a tool to promote greater social justice.

This concern reflects issues raised over a decade ago in the Henry Review, which emphasised the need for a tax system that is efficient, equitable and sustainable. The Review also noted that some taxes, particularly broad land taxes, create fewer economic distortions than taxes such as stamp duties. Accordingly, proposals to tax assets more heavily may improve both economic efficiency and fairness between generations by broadening the tax base beyond labour income. Another interesting point she raised was her proposal to charge a 27.5% rate on income from investments and remove the tax free threshold for non-labour income to reduce the artificial incentives to create family trusts - an aspect of tax law that has an immense impact on intergenerational equity.

In addition, our tax system gives investors a tax benefit on both sides of the situation - when they spend money to maintain an asset and when they sell it. Economists say that reducing the capital gains would bring the tax rules for investment properties closer to a neutral system. But, a better option would be to cut the discount to 40% and apply it to all returns from investments. 

Ultimately, this article raises sound arguments on the effects of changing the capital gains discount with a focus on high income earners who own more than one property (often multiple properties). In doing so, it fails to consider the majority of Australians who do not fall within this category. This demonstrates that a tax system usually results in differentiating tax treatment depending on the income tax bracket of the individual.

Unsurprisingly, the electorate of Wentworth receives the most CGT discounts with each person receiving around $13,450. Wentworth alone amounts to 7.5% of the total national CGT discount.

Whilst the link between income and the CGT discount is clear, it begs the question on why the current CGT discount is so large and easy to obtain when it clearly favours high income earners who account for an extremely small subsection of the community.

I found two things in the article especially interesting. First, as a prelude to the foreshadowed CGT discount cuts, it is expected that the member for Wentworth - Allegra Spender, will vote in favour of reducing the CGT discount. Spender notes that this will involve ‘difficult conversations’ with her community however I have doubts on whether the majority of her electorate will support this move at their own detriment even if it amounts to significant step towards overall wealth equality.

Second, the article suggests that there are expert opinions to bring back the inflation indexation system to account for CGT. While I do agree that this would be more equitable, I’m curious whether this would be still appropriate considering the current state of the Australian property market. With investment properties increasing, I believe that going back to the indexation model may further deter asset liquidity and result in less economic activity.

NSW is proportionally receiving the least from the GST pool, receiving $1.7 billion less than Victoria despite having 1.5 million more people in its population. This mean that NSW is receiving 25.5% of the GST share despite its population making up 31% of the Australia. In real terms this means that NSW is receiving $2,990 per person compared to $19,122 per person in the North Territory. 

The reason given for this was “above average growth in land values” which gave NSW more capacity to collect land taxes. This has led to key political figures like NSW Premier Chris Minns describing the GST distribution system as being “past its use-by date”.

For comparison Queensland saw the largest improvement in its allocations of any state with its share rising from 85 cents to 87 cents of the per dollar of GST collected. In total this is worth an extra $1.7 billion. The reason for Queensland’s increased allocations was listed as falling coal prices reducing its capacity to collect royalty revenues.

Western Australia's allocation continues to be controversial. Under 2018 legislation, WA's floor rose to be the equivalent proportion received by NSW. This means that WA receives just under 82 cents per dollar of GST contributed despite this additional money actually coming from Federal taxes not the GST. This means the federal top-up cost to ensure no state is worse off will rise from $6.1 billion to $6.6 billion in 2026/27.

The way GST is redistributed relates to our discussions regarding how for a tax system to function with the most efficiency it needs to distribute the tax burden onto those who can afford to pay it. In this sense we can see this principle demonstrated on a larger scale by examining how the states who can get revenue from other sources are deemed as being able to pay for the needs of other states and thus from an economic efficiency standpoint not in need of GST distributions to the same extent as other states.

Current Announcement

The biggest beneficiary of this announcement is WA, which is set to receive $9.3 billion. This represents a 1.3bn increase from last year, and 6.6bn more than it would have received before the 2018 policy changes. This is controversial because WA has the strongest state budget in the country due to their mining royalties. The Commonwealth Grants Commission recently admitted that under current economic circumstances, WA receives more GST revenue than what is actually needed to provide average services, while most other states receive less than what is needed.

2018 Policy

You are probably wondering what the 2018 policy changes I referred to are. It is a distribution model that was introduced by Scomo while he was treasurer. He introduced a floor of receiving 75 cents for every dollar of GST it raises, applicable to all states and territories. This shifted the system from accounting for every jurisdiction's ability to raise revenue, to now ensuring a minimum return regardless of a state's independent wealth.

Other Jurisdictions

Queensland will see a 1.7bn increase (more than WA or any other jurisdiction) primarily because the falling coal prices have reduced the state government's own revenue

Tas and NT will see a slight increase in share because of changes in First Nations populations and the number of people in regional areas

NSW, SA and Vic are all having a fall in their percentage share as funds are redirected to WA and Qld.

My Opinion

What do I think? I honestly don't know.

When learning about the 2018 policy, I was thinking about FedCon and how Scomo's policy is a significant departure from horizontal fiscal equalisation, which I think was pretty central to our decision to federate. It seems more in line with federalism to ensure that every citizen, regardless of their state, has access to similar levels of public services. Perhaps the guaranteed floor of 75 cents per dollar is too high for wealthy states like WA, so a potential reform could be lowering the floor rather than abolishing it altogether.

Economic professors seem to be very critical of the 2018 deal, and I definitely see how there is a practical problem (as well as the political/federal implications) if WA is getting more than they need while other states do not receive enough share to provide average resources. That being said, the people in WA are doing the jobs that none of us want to be doing in order to raise such a strong state budget, and it doesn't seem fair to punish them by giving them less GST payments when they are breaking their backs out in the mines. For this reason, I don't like the argument that WA might face fiscal laziness, because they are clearly the least lazy of us all. It also makes sense for WA to have lots of funding because they can use that to generate even more money for Australia, while NSW and many other jurisdictions simply don't have the resources to achieve this regardless of how much money is thrown at us.

As I have hopefully shown, there are strong considerations for and against the 2018 policy.

In light of this week's topic on corporate taxation, I read this article released by the AFR discussing the way in which Aussie banks are ramping up their campaign against major technology companies such as Apple, Google and Meta. Unsurprisingly, banks are claiming that it is "unfair" that major tech giants pay little to no tax due to complex multinational corporate structures that allow profits to be shifted offshore and recognised in lower-tax jurisdictions. This discussion is not new in the tax world, however the AFR article shares that banks are now lobbying the federal government to “level the playing field” by reforming tax and regulatory frameworks for global technology firms operating in Australia.

For many young people, this reform could be beneficial. Younger Australians generally rely more on wage income and own fewer assets, so reducing income tax would increase their disposable income. At the same time, higher taxes on investments and capital gains would mainly affect wealthier and older individuals who derive more income from assets. However, the policy could have mixed long-term effects if it discourages investment or affects property markets. Overall, in the short term it is likely to benefit younger workers, although its long-term impact would depend on broader economic outcomes.

The Guardian article highlights the increasingly uneven distributional impact of Australia’s capital gains tax (CGT) discount, demonstrating that the concession overwhelmingly benefits taxpayers in the wealthiest electorates. While the CGT discount was originally justified as a means of encouraging long-term investment and simplifying the taxation of capital gains following the removal of indexation, the data cited in the article suggests that its practical operation has diverged from this rationale.

Instead of broadly incentivising productive investment across the economy, the discount appears to disproportionately reward those already holding significant capital assets, thereby concentrating its benefits among higher-income individuals and raising serious concerns regarding vertical equity within the tax system.

This distributional imbalance also raises questions about the neutrality and efficiency of the CGT regime. By effectively taxing capital income at a lower rate than labour income, the discount creates a structural bias that may distort taxpayer behaviour, encouraging investment in assets that yield concessional capital gains rather than more economically productive activities. As the article suggests, this is particularly evident in the housing market, where CGT concessions—combined with negative gearing—have been criticised for fuelling investor demand and exacerbating housing affordability issues. In this sense, the CGT discount does not merely reduce tax liability but actively shapes market outcomes, undermining the principle that the tax system should minimise distortions unless clearly justified by policy objectives.

In light of these concerns, the growing political and academic support for reducing the CGT discount reflects an attempt to restore greater balance between equity and efficiency. The article’s discussion of potential reforms such as lowering the discount rate which indicates a shift toward recognising that the current settings may no longer be appropriate in light of contemporary economic conditions. Importantly, because the CGT discount is a policy choice rather than a structural necessity, it is amenable to reform without undermining the integrity of the broader tax system. A calibrated reduction in the discount could therefore improve the fairness of the tax system, enhance revenue sustainability, and reduce disproportionate incentives, while still preserving some encouragement for long-term investment.

https://www.grantthornton.com.au/insights/client-alerts/division-296-tax-has-passed-parliament-and-will-take-effect-from-1-july-2026/

https://www.accountantsdaily.com.au/tax-compliance/21844-lesson-in-ignoring-good-tax-principles

It’s a classic case of tax policy vs. social reality. The 50% discount was meant to keep things simple, but it’s arguably turned housing into a tax-haven rather than just a place to live. If the government scales back the discount, we might see a massive shift in how people build wealth, i.e. moving away from just "buying and holding" property to maybe looking for more diverse income streams.

For us as students/future investors, it’s a reminder that tax laws aren't static; the "math" we use to calculate ROI today might be totally different by the time we’re actually ready to sell our assets. It definitely pays to stay flexible with your exit strategy.

The core of the dispute lies in the ATO’s "unduly restrictive" interpretation of an individual’s right to occupy a dwelling under a will. Specifically, the ATO suggests that if a residency right is structured through a testamentary trust rather than being a direct right in the will, the CGT exemption might not apply. Experts argue this prioritizes "form over substance," potentially exposing families to unexpected tax bills simply due to the technical drafting style of a will.

This case is a good example of how legal structures can conflict with tax benefits. For those of us studying finance or law, it highlights a major risk in estate planning: even if the intent of a will is to let a beneficiary live in a home tax-free, the specific mechanism used (like a trust) could trigger a massive CGT event. If the ATO doesn't adopt a more "substance-based" approach, many existing estate arrangements might become tax-inefficient overnight.

The proposal is set to take effect from 2026-27, and personally, I find it interesting that it may be contrary to some concepts engaged during the discussion regarding positive limbs of general deduction in the week 4 lecture.

This directly connects to the week 5 content regarding corporate taxation and the rationale for taxing companies as separate entities. While Australia’s corporate tax system has some methods that aim to prevent double taxation and ensure neutrality, this scenario shows the tension between attracting foreign investment (efficiency) and protecting the tax base (integrity). It raises the question of whether current rules on source and permanent establishment strike the right balance in a globalised digital economy .

The core of the debate centers on the current 50% discount given to investors on the profit made from selling an asset (like an investment property) held for longer than a year. Treasurer Jim Chalmers and Finance Minister Katy Gallagher have pivoted from denials to discussing tax reform options specifically aimed at housing affordability and fairness between generations. Speculation includes reducing the discount (from 50% to perhaps 25% or 33%), returning to an inflation-indexed model (where you only pay tax on gains above inflation), or smoothing tax hits over several years to avoid a massive one-year tax bill.

To avoid reducing housing supply, the government might keep the 50% discount for newly built homes while reducing it for established (old) homes. A major sticking point is whether to 'grandfather' existing investments (leaving current owners unaffected) or phase the changes in for everyone to ensure the policy actually raises revenue and cools the market.

I think this article is important because it highlights a tax divide: older generations who own multiple properties benefit more from this discount as it helps them outbid younger first-time buyers. However, if you tax property investment more heavily, developers might build fewer houses because the after-tax profit is lower.

I think some interesting points to take away:

1. The AFR spends very little time delving into the substance of Spender's plan, and mostly criticising it. While there are valid criticisms that we should devote significant focus to reducing unnecessary tax breaks that can be abused by entities like the NDIS and the R&D tax incentive, is this the most helpful way to cover tax reform? Does it communicate enough information to readers, and does it unduly undermine the merits of the policy? (or does it take away important airtime that could be used instead to criticise the policy on its actual merits and implementation?)

2. The article's criticism exposes how tax legislation is a balancing act between how much change do we want to our tax policy vs how much can we actually implement now given the political conditions we are in? As Prof Ann said, successful tax policy is usually implemented a bit at a time, not in massive changes to tax breaks.

(and, in my personal bias, why no mention of PRRT reform? Ridiculous! That should be low-hanging fruit for the AFR)

It seems as though CGT is finally getting the much-discussed reform that has been dominating the tax-related news for the last few months.

This article highlights that a parliamentary inquiry has confirmed what we already knew - that the CGT discount settings as they are have been exacerbating intergenerational inequality in the housing market.

Chalmers has signalled that he is willing to make changes to the discount after he is briefed on the report next week, although there is no confirmation as of yet what exactly this change will be. The Treasury has been modelling changes that could see the discount reduced to 33% for housing investors, while retaining the current 50% rate for shares and other investments.

The Coalition is opposing this as expected, although it seems pretty assured something will happen. Keeping the eyes peeled.

Australia's tax system is increasingly complex, outdated, and burdened by frequent legislative changes. The Tax Institute argues the GST, unchanged for 25 years, needs reform as part of moving away from income tax reliance to ensure revenue sustainability.

There is broad political for taxing gas profits, with some proposing a flat 25% levy that could raise billions in revenue annually. Critics argue the current PRRT generates relatively little income compared to the scale of industry profits. However, gas companies and the Coalition strongly oppose the proposal, warning it would deter investment, reduce future gas supply, and ultimately increase energy prices. Industry leaders argue that introducing new taxes during a global energy crisis is poorly timed and could undermine Australia’s energy security and international competitiveness.

Different approaches are on the table to achieve this goal which balance revenue raising and fairness.

A simple and clear decision can be taken to eliminate the discount for all investment properties, including those purchased before the change was announced. This would maximise revenue generated at the expense of investors whose plans may be disrupted if they ordered their financial affairs in the expectation of receiving the discount.

Alternatively, the government can implement the change to newly purchased properties only. Little revenue would be generated by this move as investors' decision-making about buying investment properties would be altered. In contradiction to the government's commitment to intergenerational equity, younger buyers would bear the brunt of a non-retrospective approach.

The opportunity for bold reform is up for the taking by the government. Whether it will do so will soon be seen.

Under the current system, investors who hold assets for more than 12 months are taxed on only half their nominal capital gain. However, unlike the pre-1999 system, which indexed gains to inflation, today’s approach does not distinguish between real gains and inflation-driven increases in asset prices. This becomes problematic when inflation is elevated, as a significant portion of an asset’s price growth may simply reflect rising costs rather than an actual increase in purchasing power.

As a result, investors can end up paying tax on illusory gains. For example, if an asset rises by 10% during a period of 7% inflation, the real gain is only 3%, yet tax is still applied to a large share of the nominal gain. Even with the 50% discount, this can produce an effective tax burden that exceeds what would be considered fair on a real-return basis.

An important takeway this article suggests is that the flat discount is a blunt instrument that fails to adapt to changing economic conditions, raising questions about whether reforms should better account for inflation.

Hastie, a Liberal and aspirant for his party's leadership, signalled his openness to a wholesale reform of the tax system. He floated changes to capital gains discount, negative gearing and the introduction of a tax on gas exports.

These policies go against the grain of his party's traditional stances in order to garner support from younger Australians who are struggling to climb the property ladder.

A constellation of figures across the political spectrum are expressing the need for tax reform. The exact contours of the coming changes are to be determined, but it is clear that momentum is building.

The AFR reports that the Prime Minister’s Department has asked Treasury to prepare “new levy options” to capitalise on an expected surge in prices. These levy options could help shield Australians from higher fuel and energy costs, while also addressing concerns about windfall profits in the resources sector. A windfall levy would be imposed on gas companies earning elevated profits due to external factors such as the Iran conflict.

There is also increasing discussion about tightening the Petroleum Resource Rent Tax (PRRT), a profit-based tax applied to offshore oil and gas projects. Currently, the tax allows companies to first recover their costs, after which they pay 40% tax on remaining profits, with unused costs carried forward if a project is not yet profitable.

Both proposals have garnered criticism from gas companies, which argue that should these changes be implemented they could compromise energy security in Australia.

The fuel crisis was driven largely by global supply disruptions linked to the Iran conflict, so it is uncertain how effective such a measure would be at alleviating petrol prices at the retail level. Savings of 26 cents are a drop in the bucket compared to diesel prices, which have soared above 3 dollars per litre. Businesses are also unlikely to pass the full benefit of the excise reduction onto consumers, further minimising the impact on fuel prices.

The discussion on fuel excise highlights the fact that taxation alone may not be an effective mechanism for regulating the supply and demand of daily necessities. This is especially relevant to the debate surrounding CGT discount reforms as a means of combating the housing crisis.

The article also highlights the ATO’s broader focus on multinational tech companies, particularly concerns about profit shifting and whether companies are under-reporting Australian-sourced income. Rather than issuing blanket guidance, the ATO prefers case-by-case rulings, reflecting the complexity of applying existing tax frameworks to emerging industries like AI and cloud infrastructure.

Overall, the article shows the tension between attracting large-scale foreign investment and maintaining the integrity of Australia’s tax system, especially as digital business models challenge traditional concepts of where income is earned and taxed.

According to the Cost of Living Index, Norway ranks 10th, the UK 28th, and Australia 27th (https://www.numbeo.com/cost-of-living/rankings_by_country.jsp). Also, given the potential side effects of the proposed tax (e.g., a rise in gas prices, as addressed in the article), it is uncertain to what extent the proposed tax would achieve its purpose of lowering the cost of living.

Relevant to week 5’s lecture is that the proposed tax would have a huge impact on relevant shareholders and companies. It is expected that the proposed tax may not receive strong support.

On the bright side, the government could use the tax collected to provide subsidies. The article highlights that the Australian Government could have collected a considerable amount of additional tax revenue if the proposed tax had been in place since 2022. The additional subsidies for health care and other essential services would make them more accessible. And more importantly, the proposed tax is likely to make Australian gas benefit Australians.

By freeing up consumers' money spent on fuel, that same money will distribute itself throughout the rest of the economy. This increased demand acts as a mini-stimulus that will challenge the RBA's efforts to curb inflation. This is one example of how politics, economics and monetary policy are all impacted by tax.

More worryingly, the AFR notes that this 'sugar-hit' signals that the Treasurer's reform budget is in dire straits.

In the end, the immediate political pressure for relief to households' hip pockets may outweigh the long-term need for tax reform.

This reflects the broader function of tax law as a mechanism to influence behaviour and economic outcomes, rather than merely collect revenue. This article also goes into the potential inflationary risks that the policy runs.

This decision aligns with the launch of a four-step fuel emergency plan which extends from ‘plan and prepare’ to ‘protecting critical services.’ As of right now, the Government is at Level 2, monitoring supply and encouraging voluntary usage reductions. I think it was an interesting choice to release this ‘plan’, as I cold envisage it creating some panic from members of the public, although I do think it is a good thing to be prepared for what might be to come, particularly noting the uncertainty of the global conflict.

The article frames the oil shock as a catalyst for the accelerating shift towards EVs, and argues that this transition exposes a structural weakness in Australia's tax system - declining fuel excise revenue. I'd argue that this article focuses rather narrowly on replacing fuel excise revenue, rather than the deeper tensions in the Australian tax system relevant to excise discourse.

To me it highlights how taxes like fuel excise simultaneously serve revenue raising purposes and behavioural purposes (in pricing environmental externalities) and how that dual role is now harder to sustain, or perhaps increasingly ineffective as the economy shifts towards EVs. As such the transition to EVs exposes the challenge of maintaining revenue without undermining environmental policy goals.

The article also doesn't seem to account for tensions within existing tax arrangements. Fuel excise has been noted to fall more heavily on people with older, less efficient cars who are often of lower income. In that sense the EV transition doesn't just create a new gap in revenue but exposes an existing equity and structural issue in how the tax is designed.

Keen to hear the class's discussion given how pressing of an issue petrol prices have been lately!

Speculation about how investors will approach property investing after potential changes to CGT suggests buyers may now take a ‘buy and hold’ approach, and some investors may sell. The impact of this reform has already been evident. Some people are looking to sell their properties before the May budget to take advantage of the full 50% discount. However, the ‘never sell’ investor approaches the potential policy change with greater optimism, since policies evolve over time. Furthermore, other ownership structures with lower tax rates are explored. Such as using a company structure (25-30% tax), family trusts (still eligible for a 50% discount as long as the property has been held for at least 1 year), and SMSFs (15% tax rate in the accumulation phase/no tax in the pension phase). Noting that the Div 296 legislation change will impose higher taxes on super balances over $3m.

Lucia Zou z5422252

https://www.afr.com/wealth/personal-finance/property-investing-will-probably-never-be-the-same-what-to-consider-20260318-p5ospr

In particular, 'historic documentation, election validity and distribution patterns are now being revisited by the regulator' as per this article.

Especially distribution patterns are being audited, as they are classic to reduce taxes by using people or organisations that pay less taxes than the trust itself.

However, this policy risks being inflationary in the medium term. By increasing disposable income and lowering transport costs, it can stimulate demand across the economy, particularly in sectors already affected by global oil shocks. This may reinforce cost-push inflation, especially as higher fuel prices are rapidly passed through to goods and services.

In the context of the Reserve Bank of Australia, this creates a dilemma. While headline inflation may temporarily fall, underlying pressures remain, meaning further interest rate hikes are still likely.

Ultimately, the excise cut appears more like a political response to immediate pressure rather than a sustainable solution to inflation, potentially shifting the burden back onto monetary policy.

However, there are concerns and questions arising as to the effects this has on the federal GST revenue. On the consumers end, it raises questions as to whether Australian petrol businesses will pass on the benefit to the Australian people.

Comyn signalled his support for a gas tax to be implemented on new projects and contracts with a levy on the gross value of exported gas. The levy would range from 15 to 25 per cent. This speaks to the growing view that Australians are not benefitting enough from our gas reserves, and that the profits earnt from this industry should, at least in part, return to to the taxpayer. At a time when the cost of services is rising, and when there is no appetite for austerity, finding new revenue streams is increasingly important.

Capital gains tax was also in Comyn's sights. He believes that it should be reduced for investors, however, he doesn't think it will make much of a difference in raising revenue. The move would send a signal that the government is committed to intergenerational equity. I found it interesting that Comyn supports this change even though it would negatively impact CBA's home lending business. Perhaps he thinks the change is inevitable and wants to stay ahead of the curve?

In any case, I think it is a positive development for the discourse that various sections of society, including the business community, are expressing openness to tax reform.

In particular, 'historic documentation, election validity and distribution patterns are now being revisited by the regulator' as per this article.

Especially distribution patters are being audited, as they are classic tools to reduce taxes by using people or organizations that pay less taxes than the trust itself as 'recipients' for the distributions.

Currently, SMSFs rely on messaging providers (through an Electronic Service Address, or ESA) to receive contributions and process rollovers, and the ATO maintains a register of approved providers. The changes mean stricter oversight of which providers are listed and how they operate, ensuring they meet updated standards as the system evolves.

For everyday SMSF trustees, this change matters. If your ESA provider isn’t properly registered or compliant, you could face failed contributions, delayed rollovers, or even compliance issues with the ATO. It also ties into bigger upcoming reforms, such as Payday Super and SuperStream upgrades, where timely, accurate data flows will become even more critical.

In my view, although this is a technical change, it directly affects how smoothly super contributions are received and whether funds stays on the right side of regulation.

In my view, while these reforms may play a role in improving intergenerational fairness and addressing housing affordability issues, radical reform measures may have considerable negative consequences. The current CGT discounts and negative gearing policies have been in place for years, and many investors and market participants have made long-term plans based on these policies. A sudden substantial reduction in the CGT discount or complete overhaul of negative gearing could severely disrupt market stability and shake investor confidence, potentially triggering volatile property price movements.

I believe that a more balanced and gradual reform approach would be more appropriate. By slowly adjusting the CGT discount or fine-tuning negative gearing to limit its scope, the government could ensure tax fairness while avoiding major disruptions in the market. Furthermore, the government could strengthen policies aimed at helping first-time homebuyers, such as offering more first-home buyer subsidies or tax relief, to assist younger generations in entering the property market and easing their housing burdens.

Overall, while reform is necessary, it should be implemented carefully and gradually, ensuring the achievement of policy goals without triggering unnecessary market instability.

As covered during Week 7’s lecture, complex trust structures are commonly used to minimise tax liabilities and calls for reform are gaining support. However, any reform would also need to consider its impact on small and family businesses, as well as farmers, where trading trusts are frequently used.

For everyday workers, the claims most likely to attract attention are unusually high work expenses without receipts, home office deductions that don't match actual usage, and vehicle claims with no logbook to back them up.

On the brighter side, a $1,000 standard deduction is proposed for the 2026–27 year, and the lowest marginal tax rate is set to drop from 16% to 15% from July 1. Super is also changing, Payday Super reforms kick in on the same date, requiring employers to make more frequent contributions.

ATO's message is pretty consistent: keep your records clean, and you've got little to worry about.

ATO has placed family trusts at the top of its 2026 compliance hit list, alongside six other structures commonly used by private wealth groups. The message is pointed: it is not that trusts are problematic, but how they are being used that is drawing scrutiny.

Common red flags include distributions that do not reflect commercial reality, beneficiaries receiving entitlements without actual cash flow, and trusts layered with companies or bucket entities that lack real substance.

What makes this shift significant is that technical compliance is no longer enough. The ATO's current lens is principles-based: does the structure reflect genuine commercial, economic and governance intent? Having a deed and a set of minutes no longer cuts it.

The practical takeaway is that families need to reframe trusts from tax tools into properly governed capital structures, with clear documentation, defensible distribution logic and honest answers to the question of why the structure exists today.

Thoughts: This is a timely reminder that for clients using family trusts for estate planning and wealth structuring, the conversation cannot stay at the technical level. ATO is asking governance questions now, not just accounting ones. For advisers working with private clients, helping them articulate the purpose of their structures, not just the mechanics, is becoming a core part of the service.

ATO has finalised a legislative instrument setting out who gets an exemption from lodging, but the relief is narrower than many groups might hope.

Most Australian-resident parent entities and Australian permanent establishments still have lodging obligations, while subsidiaries within a tax consolidated group are generally exempt.

Crucially, there are no exemptions for the Global Information Return or Foreign Lodgment Notification, these must still be filed regardless. Eligibility for any exemption must also be reassessed entity by entity, every single year.

For those not yet ready, ATO has indicated it will remit late lodgment penalties in full during the initial transitional period, provided the taxpayer can show they acted in good faith and took reasonable steps to comply. Early engagement with ATO is strongly encouraged.

Highlights: This is squarely a large corporate and multinational issue, but it signals the direction of travel, global tax transparency is tightening, and Australia is moving in step with OECD frameworks.

For private wealth clients with cross-border structures or international investment vehicles, it is worth keeping an eye on how these rules evolve, particularly as the OECD's additional safe harbours work their way into local legislation.

However, the ATO’s current compliance focus reflects growing concern that such arrangements undermine vertical equity by disproportionately benefiting higher-income taxpayers who can access trust structures. Increased data-matching, stricter reporting requirements, and closer examination of distribution patterns signal a move toward prioritising transparency and substance over form.

From a policy perspective, this development aligns with broader integrity measures aimed at protecting the tax base without fundamentally altering the legal structure of trusts. Rather than abolishing income splitting, the regulator is constraining its misuse through enforcement.

For taxpayers, the implications are significant. Trustees must now exercise greater care in documenting distribution decisions and ensuring compliance with family trust rules, as errors can trigger punitive tax outcomes. More broadly, this trend suggests that trusts are transitioning from flexible planning tools to highly regulated structures, increasing the likelihood of disputes and advisory work in this area.

The rules around Australia's Pillar Two global minimum tax are still being refined, and there have been several significant local updates alongside the broader OECD-level developments.

On the legislative side, finalised amending legislation was registered in Jan 2026, covering areas including securitisation entities, equity investment elections and minor domestic minimum tax adjustments.

Further draft amendments are also out for consultation, with a proposed foreign currency translation rule requiring top-up tax amounts to be converted to Australian dollars at the fiscal year-end exchange rate.

A notable practical development is that Australia signed the GIR Multilateral Competent Authority Agreement in Jan 2026, which should streamline compliance for foreign-headquartered groups by allowing information exchange rather than requiring a separate GIR filing in Australia.

The OECD's Side-by-Side safe harbour package has also been noted, though the ATO confirmed it would need to be enacted into domestic law and would only affect fiscal years commencing from 1 Jan 2026 at the earliest.

>> Read alongside the PwC piece on filing exemptions, this KPMG update is a good reminder that Pillar Two is still a moving target: the rules that apply today may look different by the time many groups file their first returns. For multinationals with Australian operations, staying close to both the legislative amendments and ATO guidance is genuinely important right now, not just a compliance box-tick.

The ATO is receiving a record number of tip off regarding potential tax avoidance from people.

Is this fair? What would you do to your best mate if they report you to the ATO on potential tax avoidance?

Those are good and simple questions. However, the answers are far from simple.

Regards

Amazing GK

Building on this, the article ultimately reveals a deeper structural issue within Australia’s tax system: the gradual erosion of fuel excise as a stable revenue base. As EV uptake increases, the existing model of road funding has become increasingly unsustainable, forcing the Australian government to confront how to replace a tax we have all gotten used to.

In evaluating the competing models, the per-kilometre charge appears more consistent with established tax principles, particularly in promoting horizontal equity by aligning the tax burden with actual road use. However, its theoretical appeal is complicated by practical concerns, including administrative feasibility and privacy implications. By contrast, a fixed charge reduces complexity and offers political palatability, but does so at the expense of fairness, as it fails to differentiate between high and low road users.

Interestingly, the division is between state and federal governments, underscoring the difficulty of implementing coherent tax reform within a federal system. Beyond the design of the tax itself, there remains an unresolved question as to which level of government should bear responsibility for its imposition and collection. More broadly, the debate highlights an inherent tension between maintaining revenue integrity and supporting policy goals such as increasing EV adoption, calling into question the balance between revenue raising and sustainability.

This links closely to Week 8’s focus on tax administration, particularly the idea that Australia relies on a self-assessment system but backs it up with strong compliance measures to maintain integrity. It also made me realise how important the ATO’s guidance (like alerts and compliance guidelines) is, not just for enforcement, but for signalling to taxpayers what counts as acceptable behaviour before harsher penalties are applied.

Forensic accounting

isthe specialized practice of investigating financial discrepancies, combining accounting, auditing, and investigative skills to uncover fraud or resolve legal disputes. These experts analyze financial records to trace assets, calculate economic damages, and provide expert testimony in court, often acting as "detectives" in corporate or criminal cases. 
(from the goole).

I know this job after interviewing with a lawyer. I think most of the law student focus on being a lawyer, however, there are many ways to be a law worker. we need to think more about it.

It also emphasises that this is more than a short-term supply shock. Instead, it represents a structural change in how countries think about energy security and economic resilience. The geopolitical risks associated with reliance on the Strait of Hormuz, combined with rising input costs, are reshaping long-term investment decisions and reinforcing the shift toward renewables across the region.

This reminded me of the notion of the role of tax and economic policy in influencing behaviour, particularly how price signals (like a carbon tax) can drive changes in production and consumption. Although this “carbon tax” is indirect, it demonstrates how economic incentives can accelerate transitions in line with broader policy goals like sustainability and efficiency.

This is interesting, and I think deserves credit where it is due. Whilst it does apparently reduces prices by approximately $20 for a tank, it is unclear whether this will be felt further long the consumption chain, with other services such as energy and transport that are also reliant on fuel remaining as high as they were before.

The main argument of this article is that the system favours wealth (especially among retirees) over income earned through work. It explains that large tax concessions, particularly in areas such as superannuation and housing, allow individuals with significant assets to minimise their tax burden. At the same time, workers, who rely primarily on wages, face comparatively higher effective tax rates. The article also points to the scale of this issue, noting that millions of pensioners receive government support, even as some hold substantial assets, which raises questions about how well targeted these benefits are.

This article feeds into ongoing concerns about whether younger Australians are being treated fairly relative to older cohorts. Younger people are more likely to be in the workforce, paying income tax and struggling to accumulate assets in an environment of high housing costs. In contrast, older Australians are more likely to benefit from asset price growth and concessional tax treatment, creating a divide between those building wealth and those already holding it.

The article explains that Mr Keating’s advisers spent several years negotiating with the ATO and argued that the failure to report the tax was an honest mistake. At first, the ATO repeatedly refused to waive the extra charges and even issued a formal demand for payment. However, after a final request for a meeting in 2015, the ATO suddenly changed its position and removed the entire amount of interest and penalties, without publicly giving a clear reason.

The report says this was unusual, because ordinary taxpayers usually have to go to the Federal Court to challenge this kind of decision.

As discussed in week 8’s lecture, many countries have begun to enact legislation to combat tax avoidance. However, the effectiveness of these regimes has room for improvement. Personally, I believe that establishing a global tax regime is difficult since respecting each state's autonomy in setting its own taxation policies is essential.  

What stands out is the continued reliance on personal income tax to manage fiscal pressures. Australia’s tax base is heavily dependent on income tax, meaning that even when reforms target other areas, the ultimate impact often feeds back into income tax settings. This reinforces the importance of marginal tax rates and thresholds in shaping both government revenue and taxpayer outcomes.

The article also implicitly reflects the issue of bracket creep. As inflation and wage growth increase nominal incomes, taxpayers may move into higher marginal tax brackets without a real increase in purchasing power. This creates pressure on governments to adjust income tax settings to maintain fairness, demonstrating that reform is often reactive rather than structural.

Overall, the article shows that income tax is not only a mechanism for raising revenue but also a key policy tool for responding to economic uncertainty. It highlights that decisions about income tax rates and thresholds are shaped by fiscal constraints, inflationary pressures, and political considerations, rather than purely theoretical principles.

A key justification for profit shifting to low-tax jurisdictions is that it attracts capital and boosts those economies. However, the effectiveness of this model is increasingly questionable. Although revenue may flow onshore into these jurisdictions, this has not consistently translated into sustainable economic growth. Instead, many of these economies remain narrow and financially dependent, with limited diversification. At the same time, inequality appears to be increasing, suggesting that the benefits of these inflows are concentrated rather than broadly distributed.

From a tax policy perspective, this reflects the structural weakness of allowing profits to be allocated based on legal form rather than economic substance. It also illustrates the limitations of domestic corporate tax systems in addressing globalised business structures. This reinforces the rationale behind international reforms, such as the OECD’s global minimum tax, which seek to reduce incentives for profit shifting and better align taxation with where value is created.

Broadening the tax base, there is a proposed capital gains flat tax rate of 30% for foreign investors, covering assets with a 'close economic connection' to Australian land. The term 'real property' is newly defined to include rights and interest in land, licences and contractual rights over land, and things fixed or installed on land. Importantly, the latter would cover wind turbines, solar panels and other machinery.

Supplementing this proposal, there is a 50% temporary discount for foreign investors with respect to renewable energy assets. This means that capital gains derived from those assets will be taxed at a flat rate of 15% (at least, temporarily). This is intended to support investment into Australia's renewable sector as part of the nation's energy transition. Nonetheless, this concession is drafted so as to only apply until 30 June 2030.

These measures are forecast to raise about $200 million a year in additional revenue for he government, with Chalmers stating that 'these reforms will ensure foreign residents pay a fair share of tax in Australia while providing generous concessions for investments in renewable energy'.

At the same time, Albanese has been on a diplomatic push to reinforce Australia’s role as a reliable energy supplier, meeting with Singaporean Prime Minister Lawrence Wong and emphasising long-term LNG supply commitments. However, Singapore, (currently a major buyer of Australian gas) has warned it may diversify its energy sources if Australian exports become less competitive due to increased taxation.

These developments expose the tension of balancing domestic energy security and cost-of-living pressures against the need to attract investment and maintain credibility in global energy markets.

The ATO has been tasked with conducting a statutory review of Australia's thin capitalisation rules to determine whether they can effectively achieve the policy objective of limiting excessive debt deductions. Among other issues, the ATO has been requested to review the third-party debt test provisions, the $2 million exemption threshold, and the default tax EBITDA calculation. The review began on 1 February 2026 and will involve public consultation, with the final report to be finalised within 12 months.

The purpose of thin capitalisation rules is to prevent multinational corporations from avoiding tax through profit shifting and debt restructuring. However, they also increase the complexity of the tax system and disincentivise companies from doing business in Australia. In particular, the current $2 milion exemption threshold which is based on gross deductions may overstate real debt exposure, justifying a switch to calculating net deductions. It will be interesting to see how the ATO balances the competing policy considerations between ensuring fair taxation and attracting global businesses.

With the first Pillar Two returns due 30 June 2026, the ATO has been stepping up practical support for affected multinationals. Groups with global turnover of €750 million or more operating in Australia are required to adhere to the GloBE framework, which imposes a 15 per cent global minimum tax on income years starting on or after 1 January 2024.

Recent ATO guidance addressed some practical logistics: online lodgment through business or agent portals has a 20-entity limit, while Digital Service Provider channels allow up to 300 entities, with larger groups directed to contact the ATO directly.

On safe harbours, three transitional tests are available: a de minimis test for jurisdictions with revenue under €10 million and profit under €1 million, an effective tax rate test, and a routine profits test comparing total profits against substance-based payroll and asset costs.

The ATO has flagged more information sessions ahead, and its overall tone remains supportive rather than punitive — for now.

- Thoughts: Compared to the PwC and KPMG pieces, this one is closer to ground level. The entity limits on lodgment channels are the kind of detail that catches groups off guard late in the process. Worth a read for anyone in the compliance weeds.

The ongoing debate within the Labor Party about whether additional taxation should be imposed on gas exporters. In my view, while it may not be appropriate to introduce new taxes immediately due to current geopolitical uncertainty and instability in global energy markets, particularly in the context of the Middle East conflict and concerns about energy security, this does not mean that such reforms should be abandoned altogether. Instead, the government could consider adopting a staged approach by postponing major tax changes until global energy conditions stabilise. Once market conditions become more predictable, introducing targeted reforms, such as adjustments to the Petroleum Resource Rent Tax or limited export levies, would allow Australia to capture a fairer share of resource profits without undermining investment confidence or energy supply stability. This approach would balance short-term economic security with longer-term tax fairness and public expectations regarding the use of national natural resources.

The case concerned a corporate trustee whose directors and shareholders—three brothers—were also beneficiaries of the trust. The company provided them with luxury vehicles for both business and personal use. While the Commissioner assessed fringe benefits tax (FBT) on their personal use, the Full Court ultimately held that no fringe benefit arose.

Central to the decision was the statutory requirement that a benefit be provided to an “employee” and “in respect of” their employment. The Court confirmed that “employee” bears its ordinary, common law meaning, rejecting any broader statutory interpretation. This reinforces the relevance of recent High Court authority on employment relationships.

Equally significant is the Court’s approach to the “in respect of” requirement. A mere causal link between employment and the benefit is insufficient. Instead, there must be a meaningful or material connection. Where a benefit is better explained by another relationship—such as the trustee-beneficiary relationship in this case—it will fall outside the FBT regime.

This decision is likely to become a leading authority on the scope of “fringe benefits”, with practical implications for structuring arrangements involving trusts and closely held entities.

In a pre-budget speech this afternoon, Chalmers said new Treasury scenarios forecast inflation to reach from high 4 per cent if oil prices stay at $US100 a barrel to 5.5 per cent if prices continue to rise to $US120.

The article also highlights disagreement among stakeholders, with some groups supporting a future road user charge but only once EV adoption reaches a certain threshold, while states like NSW and WA are considering their own approaches following legal challenges to state-based schemes. Overall, the issue illustrates the broader tax policy trade-offs we discussed in class, particularly between revenue sustainability, economic efficiency, and behavioural incentives, showing how governments must balance raising revenue with shaping taxpayer behaviour

1. Intergenerational Inequity: Home ownership among younger Australians (ages 25–34) has plummeted significantly over the last two decades. The government argues that current tax settings favour established investors over first-home buyers.

2. Budgetary Impact: Treasury data suggests the CGT discount alone will cost the budget $21.8 billion in 2025–26. Furthermore, rental deductions (including negative gearing) totalled $57.1 billion in a single year.

3. Wealth Concentration: Statistics show that the "rich" are the primary beneficiaries; approximately 83% of CGT discount benefits flow to the top 10% of income earners, while the top 30% of earners claim 71% of negative gearing benefits.

One reform option being considered is a "cap" that would prevent landlords who own more than two properties from claiming negative gearing tax breaks.

• This change can benefit current, small-sacle landlords through grandfathering, meaning existing assets remain under old rules while new rules apply to future acquisitions.

• If you plan to build a large portfolio, the two-property cap would prevent you from using losses on those aditional properties to reduce the tax on your salary.

• Banks often factor in tax refunds from negative gearing when calculating how much you can afford to borrow. If these benefits are stripped away, your ability to secure loans for future properties may decrease.

• Investors fund a large portion of new homes. Reducing these tax incentives could lead to fewer homes being built over the next five years, which could hurt tradies and builders.

Multinationals will have to disclose activities in over 40 jurisdictions, including Switzerland and Singapore, regarding taxes paid, profits, the number of workers and other financial information.

The government believes that sun is the best disinfectant, and that these disclosures will be a deterrent for multinationals shifting profits to lower taxes jurisdictions.

Details are in the link attached.

In summary, Treasurer Jim Chalmers is seeking to impose aretrospective CGT laws dating back to 2006, in order to raise billions for the upcoming federal budget. These new laws would involve the broadening of a 30% CGT on foreign investors selling land related assets in Australia. This would override major Federal Court judgments form last year relating to mining company Newmont, in which the Court found that the company's sale of assets (which included fixtures on land) was not taxable as real property.

The move has come with heavy scrutiny from legal and accounting circles, mostly around the idea that the laws are retrospective and therefore potentially unfairly affect taxpayers who did not know they would be liable for CGT when they chose to invest in Australia up to 20 years ago, therefore lessening Australia's attractiveness as a place for investment.

On 10 April 2026, the Australian Treasury released exposure draft legislation that would significantly expand the CGT net for foreign investors in Australian assets. Despite being flagged as a “clarification and broadening” in the 2024-25 Budget, the changes go considerably further than expected. Only a two-week consultation window was given, seemingly to push the legislation through before the 2026-27 Federal Budget on 12 May 2026.

The main changes:

• Broader “real property” definition captures anything fixed to Australian land for most of its useful life — wind turbines, solar panels, batteries, mining equipment, transmission networks, pipelines.

• Retrospective to December 2006, exposing non-residents to reassessment on decades-old transactions.

• Treaty override aligns treaty references to “real property” with the new domestic definition — but isn't retrospective, so retrospective impact mainly hits non-treaty countries.

• 365-day principal asset test replaces the point-in-time test, increasing compliance and valuation disputes.

• Limited 50% CGT discount for renewables, but only until 30 June 2030 and subject to strict conditions — unlikely to offset the broader impact on the sector.

• New withholding rules for A$50m+ deals require ATO notification of vendor declarations and active due diligence by purchasers.

The authors of this article argue this is a material, and in places inappropriate, expansion of Australia’s tax base for non-residents. The retrospectivity in particular should be abandoned. The changes create significant uncertainty for foreign investors, especially in renewables, and meaningfully increase compliance obligations on M&A transactions

Most relevantly, the page shows that the ATO is continuing to refine its approach to thin capitalisation, including the new debt deduction rules and cross-border related party financing. It also focuses on software and intellectual property payments.

The page is also important because it refers to the PepsiCo High Court case and explains that the ATO is still working through its implications for characterising payments as royalties, determining income derivation, and applying diverted profits tax. This makes the page a good real-world example of how the legal issues from this class are still being interpreted and developed in practice.

Related to the Week 9 lecture, this legislation clarifies "taxable Australian real property" by confirming that assets such as wind turbines are taxable.

Another key part of the news is the ATO’s decision impact statement on the PepsiCo case. The ATO explains that it will continue to closely examine cross-border arrangements involving payments for intellectual property, especially where taxpayers try to avoid a payment being treated as a royalty. The ATO also stresses that the High Court’s conclusion on DPT was based on unusual facts, so the case does not greatly limit the future use of DPT or Part IVA in other cases.

The proposed changes are controversial because they apply retrospectively (potentially as far back as 12 December 2006), meaning foreign investors could face tax liability on transactions they completed years ago under the old system that no tax was owed. The retrospective application is concerning from a rule of law perspective, and the short two-week consultation window is arguably inadequate for changes of this magnitude and complexity. 

While the article provides a thorough technical breakdown of the proposed changes, it is written from the perspective of a law firm whose clients are predominantly foreign investors. This means that the analysis is not entirely neutral. The article frames the reforms as damaging to Australia's sovereign risk and foreign investment attractiveness, but gives little weight to the government's legitimate policy objective of protecting the domestic tax base.

Treasurer Jim Chalmers today confirmed the tax break will be officially enshrined in law and will come into effect in time for the 2027 tax season next year.

The maximum tax saving under the legislation will be $470, with the average saving being $205.

On the surface, this policy is a great simplification. The compliance burden on everyday workers of tracking receipts for uniforms, tools, and home office costs is genuinely burdensome, and reducing that friction is highly valuable. However, there are important limitations worth scrutinising. First, the framing as "instant relief" is somewhat misleading. Choosing the flat $1,000 deduction means you cannot claim your real expenses. In particular, if your work-related costs are higher, you could miss out on a bigger refund. For many professionals such as teachers, tradespeople and remote workers, actual expenses routinely exceed $1,000, meaning the simpler option may actually leave them worse off. Second, in practice, many taxpayers may still need to keep receipts because they will not know whether your total work-related expenses exceed $1,000 until the end of the financial year. The promise of a receipt-free experience may prove illusory for cautious taxpayers. Finally, the timing of this policy being announced ahead of a federal budget and amid cost-of-living pressures raises the question of whether this is substantive tax reform or electoral positioning.

From the perspective of young workers and recent graduates, the proposed $1,000 instant tax deduction represents a modest yet practical reform within Australia’s personal income tax framework. Although the direct financial benefit is relatively limited, the measure is likely to significantly reduce compliance complexity for taxpayers with relatively simple income structures and comparatively low levels of work-related expenses. In this respect, the reform improves the accessibility and usability of the tax system for early-career workers who may have limited familiarity with substantiation requirements under the existing deduction regime. However, the policy provides only a relatively small degree of cost-of-living relief and does not address broader structural pressures affecting younger taxpayers, particularly in relation to housing affordability and student debt obligations. Accordingly, the proposal is more appropriately understood as a compliance-simplification initiative rather than a substantial tax-reduction measure.

After the last Gulf Oil Shock in the 70s, Japan - a true innovator when it comes to economics - imposed an energy imports tax (around 25-30% on foreign MNEs in the LNG market) which delivers around $8 billion (AUD) in revenue each year, most of which is mandatorily diverted to a national fund for measures to bolster national fuel security. The innovation ensured that a net-energy importer could meet national energy demands, and use revenue to achieve even higher levels of energy security than many energy-exporters.

Recently, Greens Senators have pointed to Japan's experience, arguing that the Greens' proposed 25% minimum tax on LNG exports could fund similar measures like Japan's energy security fund, thus realising long-term supply-side advantages for Australia. (At risk of over-simplification, the Greens' "Gas Tax" is almost the reverse of Japan's energy-imports tax - proposed to take the form of a 25% marginal rate on all Australian LNG exports).

However, unlike Japan, Australia is a net energy exporter - and is thus more vulnerable to taxes that could potentially disincentivise growth or FDI flows into the LNG sector. Simply claiming that increased revenues could possibly fund an energy security fund is the epitome of lazy economics; pointedly, recent modelling by the Australia Institute shows that the Gas Tax could reduce FDI in the sector by 30-40%. No doubt this could substantially undermine domestic supply, given that foreign MNEs control more than 93% of the Australian LNG sector. (Obviously, the soundness of this market distribution from a competition policy view, or even in terms of its affect on national sovereign capability, should certainly still be up for debate, however).

Thus, where Japan's energy taxes involve it taxing consumption in a captive market (ie, a market where more than 95% of energy is already imported and this will remain largely unchanged by the imposition of the tax), the Greens' Gas Tax would tax production (ie, Australian-sourced LNG) in a highly competitive global energy market, likely pricing out MNEs and FDI inflows. If anything, a new windfall tax in the wake of an economic crisis hardly sends a message to our trading partners that Australia is open for business; all it does is show that we don't have our house in order. (In the words of former Treasurer Peter Costello, any tax that would endanger FDI commits the clearest form of economic self-harm: fewer financial inflows into Australia).

However, an interesting counter-point recently raised by the Australia Institute has been that the Scandinavian experience of windfall taxes on LNG industries has shown that suggestions as to their "chilling effects" on FDI inflows are nothing more than hawkish, neoliberal scaremongering. Their analysis suggests that FDI inflows in that region have remained substantially unchanged. Yet, an important element seemingly missing in this analysis is that in Norway, for example, heavy subsidies and exorbitant bailouts have been granted to energy sectors affected by windfall taxes. Extraordinarily, large LNG firms can even have losses reimbursed by the government - an economic fairytale (largely made possible because of the staggering wealth of the Scandinavian region) that could almost certainly never gain popular support in Australia.

Moreover, peak organisations like the Australian Energy Producers (AEP) have argued that it is completely futile to suggest that an LNG windfall tax would put downwards pressure on energy costs by encouraging firms to focus on domestic markets and reduce their reliance on export-based models. Using Girard's theory of "scapegoat economics", the AEP has argued that the Greens' proposal does nothing more than conjure up public anger about MNEs (who are seen to be free-riding off Australia), and imbue them with a confected burden to "change their ways" so that energy prices can decrease over time. There is no discernible economic proof that increased LNG supply will lower energy prices in a time of global oil shocks.

Clearly, the proposed LNG windfall tax is set to reignite significant national debate. Watch this space.

Commencing in July 2026, Div 296 will apply a 15% rate on superannuation earnings for individuals with a total super balance exceeding $3 million (or spouses with combined balances exceeding $3 million) - that is, more than 137,000 Australians, the vast majority of whom are wealthy retirees who have certainly paid their way and contributed to the economy for many years more than the Div 296 proponents. Pointedly, Div 296 is designed to capture retirees who see themselves as "asset-rich, but income-poor".

Initially, the Tax Institute was mainly concerned that Div 296 was an unusual tax on unrealised gains, given that it captures even 'paper increases' to one's super balance (ie, even when they have not been converted into some other form of investment). However, recently, the commentary has shifted to the potential for Div 296 to unfairly impose major tax burdens on a surviving partner, where the surviving spouse inherits a large super balance on the death of their spouse, and suddenly find themselves liable for this new tax liability, despite having a lower balance prior to their partners' death.

According to the Workplace Gender Equality Agency, Div 296 is likely to unfairly hit surviving female spouses given that women statistically outlive men in Australia, and that women have disproportionately less superannuation than men overall due to a whole range of other intervening structural inequalities. Hence, for these groups of the population, Div 296 will be less of a tax on wealth, and more of a "widow tax". Indeed, the Tax Institute has suggested that many tax advisors have already begun advising widowers who inherit large super balances to consider withdrawing excess amounts over $3 million to reduce their Div 296 tax liabilities.

At first glance, this may appear to be no more than a bureaucratic nuisance (ie, wealthy widowers need to simply withdraw the spouse's super funds to reduce their tax liabilities). However, industry groups are concerned that this may further entrench structural disadvantage for women, who already have a lower level of superannuation than men. This is because super balances generally perform better than self-managed investments for wealthy retirees (notwithstanding the COVID pandemic years).

Hence, if and when it becomes a norm for advisors to encourage widowers to offload super balances, all this will do is see them exit superannuation - a microeconomic brainchild of the Keating era that was supposed to reduce structural disadvantage, not entrench it. This could have terrible consequences for widowers who withdraw from super funds only to make investments that perform poorer than super funds themselves.

With July soon approaching, this issue will likely gain more prominence in the weeks and months ahead.

The introduction of the $1,000 instant tax deduction reflects an effort to simplify tax design by reducing the administrative complexity associated with lodging tax returns. Previously, taxpayers were required to maintain detailed records and substantiate individual work related expenses, which created significant compliance burdens and procedural red tape. By allowing a standardised deduction without the need for receipts, the reform streamlines the process and improves accessibility within the tax system.

The push comes as data shows the gas industry often pays less in tax than students do in HECS repayments, with 56% of exports currently leaving Australia royalty-free. While the ACTU and think tanks back the move to tackle the cost-of-living crisis, industry groups warn it would "spook" investors and threaten future energy security.

In response to the recent bombshell dropped by the Budget proposal to reform Australia’s capital gains tax (CGT) by abolishing or reducing the 50% CGT discount for property investors found in this article, I believe there are significant ramifications that could significantly increase the tax burden on landlords when selling investment properties, with potential six-figure increases in tax payable. The reform is framed as part of a broader policy push to improve fairness in the tax system and address concerns that current settings disproportionately benefit wealthier investors.

From a policy perspective, the proposal raises important questions about equity and efficiency in the tax system. The current CGT discount arguably undermines horizontal equity by favouring capital income over labour income, and may distort investment decisions by incentivising speculative investment in housing rather than more productive sectors. Removing or reducing the discount could improve tax neutrality and make the system more progressive, aligning with broader goals of intergenerational equity. However, the effectiveness of such reform depends heavily on its design, including whether existing investments are grandfathered.

The economic implications are more uncertain, particularly in relation to housing affordability and rental markets. While reducing tax incentives for investors may dampen demand and slow house price growth over time, it could also discourage investment in rental properties, potentially reducing supply and increasing rents. This highlights a key trade-off in tax policy: reforms aimed at improving fairness can produce unintended market consequences if not carefully balanced with complementary measures, such as policies to increase housing supply.

• The Australia Institute has proposed a 25% export tax, estimated to generate $17 billion annually. This aims to mirror high-revenue models in Norway and Qatar.

• Advocates highlight a perceived imbalance where Japan (an importer) reportedly collects more revenue from Australian gas through import taxes than Australia does through its own Petroleum Resource Rent Tax (PRRT).

• Opposition Leader Angus Taylor and industry groups argue the tax would threaten fuel security and kill future projects. They claim the industry already contributed $21.9 billion in various taxes last year.

  • Lower taxes and less regulation encourage investment, which leads to job creation and indirect tax revenue.

  • Changing tax laws "mid-game" makes Australia look like an unstable place to do business, potentially driving away billions in foreign investment.

This may come to an end soon as this policy is costing too much. So, if you are thinking about buying an EV due to the FBT exemption, well... your chances of getting the benefit may not look so good.

What you can do is reduce your taxable income by that amount; the size of your tax deduction will depend on your marginal tax rate.  For example, if you earn $100,000 a year, your marginal tax rate is 30%.  Reducing your taxable income by $1,000 will mean your tax bill will be $300 lower. Treasury says the maximum benefit will be $470, and estimates the average benefit will be about $205. 

About four in 10 workers, or 6.2 million workers, will benefit from the new rules, Treasury reckons.

If you have more than $1000 expenses, you’ll need to list and substantiate all of your work-related expenses, which means you better keep all of your receipts.

Basically, this change to the rules is no help at all if your expenses are more than $1,000.

In my opinion, it's a really good way to relive the tax levy on the people. I hope can find more news about it.

At last, this is the final class of this class. Thank u sooo much to meet u! As a foreigner, I've learned a lot from this class.

The departure prevention order (DPO) used by the ATO is allowed under Part IVA of the Taxation Administration Act and gives the Commissioner the power to issue such an order to prohibit a debtor from leaving Australia. This becomes a very significant restriction on an individual by depriving of their ability to travel outside of Australia.

Although it is extremely restrictive, the ATO keeps taxpayers accountable by ensuring that they pay their obligations before going overseas for a holiday. The orders are issued without prior notice, so people don't find out until they are about to board a flight. With 21 DPOs issued in the past year, it seems to be an effective measure.

Given the extraordinary amounts owed by people to the ATO, one can only see the necessity of such a crackdown. The ATO has ramped up its debt collection since the end of COVID, when it took a more lenient approach. I think we will continue to see more of this happen, and the ATO taking a more aggressive stance on anti-avoidance, particularly for cases where the taxpayer decides not to comply with their obligations.

The proposal seeks to significantly expand the definition of 'taxable Australian real property' (TARP) under s 855-20 of the ITAA97 to include water entitlements in relation to a water resource situated in Australia, as well as options or rights to acquire a CGT asset that is TARP. The definition of 'real property' has also been expanded beyond its ordinary meaning, which will include licences and contractual rights over land. Arguably, the ATO has always adopted a broad approach to interpreting the definition of TARP, and the proposed changes will only align the law with its practical application without significantly altering its scope.

The more controversial change pertains to certain aspects of the updated definition of real property, which will be backdated to 2006. This is uncharacteristic of the Australian tax system, as it would affect property transactions that have already been performed 20 years ago. Applying a law retrospectively raises fairness concerns, since a foreign investor at the time of decision-making could not possibly have envisaged such an increase in their tax burden. As discussed in class last week, imposing additional taxes on foreign investment will increase the complexity of the tax system and potentially reduce the competitiveness of the Australian market. Ultimately, governments must be mindful of the unintended consequences of tax reform despite the pressure to broaden the tax base.

This also links back to the course discussion of what makes “good” tax - and raises difficult questions about who should bear the burden, and whether the whether the such reforms would fairly affect younger, lower-income and older taxpayers differently. However, consider how a higher GST tends to disproportionately affect lower income groups because GST is a flat consumption tax, and lower income households usually spend a larger share of their income on day to day consumption rather than saving or investing.

The Australian Institute is suggesting a flat 25% export tax which would add an estimated $17 billion to the Federal Budget. But as with all tax changes as this scale, it is unlikely that a flat rate will be effective in treating all companies and exports equally, even if designed to do so.

The article makes a jurisdictional comparison to justify the proposal, stating that such a tax would bring us closer to gas tax treatments in countries such as Norway and Qatar. It is important however to consider the pushback by mining/gas companies and the lobbying that has historically resulted in repeal of such provisions.

But with a need to raise the Federal Budget's "bottom-line", this solution seems feasible, if properly developed with thorough consultation and attention to unintended consequences, in achieving such a goal.

Norway impose a 78% effective tax rate on North Sea projects, combining corporate tax with a cash flow-based petroleum tax which allows for companies to deduct exploration and investment costs, and carry forward losses. This design ensures the system remains investment-neutral, with the state sharing both risks and returns. However, Norway also benefits from state ownership of oil/gas fields, pipelines and processing facilities. The money is used to accrue wealth for future generations, with one of the most significant programs that petroleum revenue funds being free university.

However, the model has been criticised. Some argue the fund makes government spending too easy, and allows for Norway to have too much liberty. Australia’s gas sector also differs greatly, particularly when considering Norway’s level of state ownership and coordinated policy framework. There is concern that increasing taxes could deter investment, and worsen supply issues. Overall, Norway demonstrates that high resource taxes can be combined successfully with sustained investment policies. While Australia will not be able to replicate Norway’s situation, it is important to recognise the value of integrating taxation with broader institutional settings.

Another interesting part of the numerical evidence is structural. Under horizontal fiscal equalisation, a state that successfully reforms its tax base receives less GST, so the reward for good policy is a reduced Commonwealth transfer. This compounds the fiscal gap problem; stamp duty arrives upfront, land tax is collected across the life of ownership and no state treasury can absorb that timing mismatch without federal bridging support. Together, these explain why consensus has long existed without producing reform. As GST operates as a partial disincentive, this makes it clear that good tax design at the individual tax level is not enough; the architecture connecting taxes to each other also matters.

Australia is reforming its anti-money laundering regime through amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, with enrolment for “gatekeeper” professions opening 31 March 2026 and obligations commencing 1 July 2026. For the first time, lawyers, accountants and real estate agents must undertake customer due diligence and report suspicious matters to AUSTRAC, closing long-standing gaps that enabled misuse of professional services.

Australia has effectively lagged for nearly two decades in extending AML/CTF obligations to these sectors, delaying full alignment with Financial Action Task Force standards. This links to Week 8 (tax administration and anti-avoidance), as regulating intermediaries improves transparency around structures used to conceal income and strengthens the integrity of the tax system.

The rapid expansion of data centres is emerging as a new frontline in global tax enforcement, as authorities scrutinise how multinationals structure these assets to minimise tax across jurisdictions. In Australia, the ATO now treats data centres as “fundamental and valuable” business operations rather than passive infrastructure, raising significant issues around permanent establishment, transfer pricing and the risk of profits being shifted offshore.

At the same time, governments (e.g. India) are offering generous tax incentives to attract investment, creating a clear tension between competitiveness and protecting the tax base. This links to Week 9 (international tax), as it shows how digital infrastructure is reshaping where value is created and exposing the limits of traditional rules on where profits should be taxed.

https://consult.treasury.gov.au/c2026-757530

Australia’s proposed $1,000 standard deduction, released as a Treasury exposure draft on 20 April 2026 and closing 1 May 2026, would allow taxpayers to claim a fixed amount without substantiating expenses, simplifying deductions currently governed by Div 8 ITAA 1997. Deductions reduced revenue by around $42 billion in 2021–22, with evidence of widespread over-claiming, meaning they often operate as a tax minimisation tool rather than an accurate measure of taxable income.

However, trade-offs remain. While low-claim taxpayers benefit from simplicity, those with high legitimate expenses (e,g, tradespeople) may be worse off unless itemised claims are retained. This links to Week 4 (deductions), highlighting the tension between equity, efficiency and simplicity in tax design.

Australia’s GST has become a flashpoint in federal-state relations, with growing claims the distribution system is “broken”. Under the current horizontal fiscal equalisation model, NSW receives about 82 cents for every dollar of GST raised in the state, while Western Australia receives a comparatively larger share, fuelling tensions between jurisdictions. Although the GST is a 10% broad-based consumption tax collected nationally, its redistribution continues to produce uneven outcomes across states.

Beyond distribution, Australia’s GST rate remains low by OECD standards, which has renewed debate about whether it should be expanded or increased. This connects to Week 10 (GST) by showing how both the structure of the tax and the way revenue is allocated can shape fiscal outcomes and drive ongoing policy controversy.

Australia’s family trust rules are facing renewed criticism following a case involving Chris Thomas and his family, where a simple error in a family trust election triggered 47% family trust distribution tax (FTDT), despite no tax avoidance or revenue loss. The mistake involved nominating the wrong individual, meaning distributions fell outside the permitted “family group” and automatically attracted the penalty under strict anti-avoidance rules, with no discretion for the ATO to provide relief.

This links to Week 7 (trusts), showing how anti-avoidance rules in trust taxation can produce disproportionate outcomes when applied rigidly, and highlighting the tension between preventing tax abuse and ensuring fair, practical administration.

Australia has released draft legislation on 10 April 2026 to strengthen the foreign resident CGT regime, expanding what counts as “taxable Australian property” under Div 855 ITAA 1997. The reforms broaden the definition of real property and introduce a 365-day lookback test for indirect interests, ensuring foreign investors are taxed on gains from assets connected to Australian land even where structures attempt to avoid CGT.

This links to Week 3 (CGT), as it shows how the scope of CGT is being expanded to capture capital gains that reflect economic value in Australia, reinforcing core CGT principles while addressing avoidance through complex structuring.

https://taxfoundation.org/data/all/global/corporate-tax-rates-by-country-2025/

Australia’s corporate tax system is under review following Productivity Commission proposals to reduce the company tax rate from 30% to 20% for most firms and introduce a 5% net cashflow tax, aimed at boosting investment and productivity. This comes in a global context where Australia’s 30% rate sits above the worldwide average of around 23.6% (26% GDP-weighted), with rates ranging from about 8% in some jurisdictions to 50% in others, and around 15 jurisdictions imposing no corporate tax at all, contributing to Australia ranking around 29th on the 2025 International Tax Competitiveness Index.

This links to Week 5 (companies and shareholders), as it shows how company tax settings influence where firms invest and how profits are distributed to shareholders, highlighting the tension between maintaining revenue and remaining competitive in a global tax environment.

The update mainly talks about two things. First, it says that from 1 April 2024, employers may be able to use existing records instead of formal documents like travel diaries or employee declarations for some fringe benefits.

Second, it explains a change about plug-in hybrid electric vehicles (PHEVs). From 1 April 2025, PHEVs are generally no longer eligible for the electric car FBT exemption. However, there is a transitional rule. If the car was already exempt before that date and there was a binding commitment in place before 1 April 2025, the exemption can continue for some time.

The update also discusses home charging costs for EVs. It refers to PCG 2024/2, which gives employers and individuals a practical method for calculating electricity costs when charging a vehicle at home. A later update in November 2025 extended this guidance to PHEVs as well.

This update shows that FBT is not just a theoretical topic in legislation or cases. It is still changing in practice, especially in response to new issues like electric vehicles and modern record-keeping methods.

According to the article, NSW will still receive more GST in dollar terms than this year, but its share relative to its population will fall. That is why the NSW premier criticised the current system and said it is unfair and outdated. He argued that GST should be distributed in a way that is more closely based on population.

The article also explains that WA is the biggest issue in this debate. Since the 2018 law change, WA has been guaranteed a minimum GST share, even though it is currently the strongest state financially, mainly because of the iron ore boom. On the usual fiscal capacity calculation, WA would have received a much lower share, but under the special rule it will receive much more.

Because WA gets this protected share, the federal government has to provide top-up payments so that other states are not worse off. The article says these extra payments will reach $5.5 billion in 2026–27, and the total cost since 2018 has become very large.

It would be interesting to observe changes to tax law in the upcoming May budget given the extensive discussion throughout the course.

The article also discusses the concern that some landlords may sell up or stop investing if tax concessions are reduced. But the broader argument is that this may not necessarily be a disaster — if investors leave the market, some homes could shift back toward owner-occupiers. The bigger issue is whether the reform is designed strongly enough to actually change incentives, rather than simply looking like a housing affordability measure without much bite.

Overall, the article presents the CGT change as politically important, but economically limited unless it is paired with wider reforms to negative gearing, housing supply, and the way existing property investors are treated.

In relation to trusts the article details that Labour is considering changes to discretionary trusts, mainly because they can be used to reduce tax by splitting income between beneficiaries. One option mentioned is Labor’s old 2019 policy: which details a minimum 30% tax rate on distributions, However, the article says the final trust policy has yet to be settled, partly because trust structures are complex and widely used by small businesses, farmers and high-wealth individuals.

In relation to trusts the article details that Labour is considering changes to discretionary trusts, mainly because they can be used to reduce tax by splitting income between beneficiaries. One option mentioned is Labor’s old 2019 policy: which details a minimum 30% tax rate on distributions, However, the article says the final trust policy has yet to be settled, partly because trust structures are complex and widely used by small businesses, farmers and high-wealth individuals.

As we have discussed in class the proposed changes to the CGT discount have stirred up a significant amount of excitement and concern amongst different taxpayers. Some of the proponents of the change have argued that changing the capital gains tax discount will help to alleviate housing affordability by reducing the incentive for investors to purchase homes and thus reduce the demand for houses and thus the price. However this article is arguing that unfortunately the changes to the CGT concession may not dramatically fix housing affordability on their own. Economists quoted in the piece argue the impact on house prices would likely be “tiny”, especially if the government protects existing investors through grandfathering rules (though there have been comments from the treasurer that indicate grandfathering may not be adopted). This article argues that if current landlords keep most of their existing tax benefits, the reform may not do much to shift wealth or improve fairness for younger Australians.

The article also discusses the concern that some landlords may sell up or stop investing if tax concessions are reduced. But the broader argument is that this may not necessarily be a disaster — if investors leave the market, some homes could shift back toward owner-occupiers. The bigger issue is whether the reform is designed strongly enough to actually change incentives, rather than simply looking like a housing affordability measure without much bite.

Overall, the article presents the CGT change as politically important, but economically limited unless it is paired with wider reforms to negative gearing, housing supply, and the way existing property investors are treated.