The Hon Andrew Leigh MP
Assistant Minister for Productivity, Competition, Charities and Treasury
Tax Reform
House of Representatives,
Parliament House
4 June 2026
The essential story of Australian policy reform is of moments in which Labor Governments make the hard choices, followed by fallow periods of Coalition Governments. Of those moments, in which Labor Governments have made tough policy choices, we've often been opposed by those opposite. They fought us on Medicare in every election from 1969 to 1993. They opposed the introduction of capital gains tax, they opposed the creation of universal super, and they opposed Labor's measures to put in place a clean energy future, so it's no surprise to see the forces of conservatism in Australia today opposing Labor's sensible changes to rein in the excesses of negative gearing and the capital gains tax discount in order to put 75,000 more Australians into a home of their own.
This bill before the House will deliver a tax cut to all working Australians through the new working Australians tax offset. This is an important measure which rewards income from work. I did my PhD thesis on the US Earned Income Tax Credit and can attest to the benefits of a tax credit that is directed at income from labour. It boosts labour supply and creates stronger incentives for participation. This important tax cut for all working Australians is also backed up by the instant tax deduction, which ensures that Australians with modest tax affairs without big deductions don't need to go through the paperwork burden of maintaining receipts but get that automatic tax deduction every year.
The changes that we're making to rein in the excesses of negative gearing and the capital gains tax discount are dealing with a problem that goes back decades. Negative gearing was put in place in 1936 and the capital gains tax discount in 1999. Together they acted to increase the incentives for investors to get into the market and caused at so many auctions investors to beat out first home buyers. Shortly after the changes were put in place by the Howard-Costello Government, we saw taxable rental income turn negative. Landlords on net were claiming more back from the taxpayer than the tax that they were paying. We saw at auction after auction first home buyers find that prices were just pushed out of reach and that they were beaten by investors at a chance to get a home of their own. Our homeownership rate steadily fell, particularly for younger Australians, and many experts called on parliamentarians to do the right thing and deal with the problem that had arisen.
We didn't just see that from forces on the left of politics, although we certainly saw useful contributions such as the work done by the McKell Institute. We even saw Joe Hockey, in his valedictory speech from parliament, say that negative gearing should be restricted to new-build homes, which is, for new purchasers, precisely what this bill does. It says to those who want to claim the benefits of negative gearing, 'If you've got a property already then you can continue to use negative gearing, but if you want to opt into the system then you need to buy a new-build home.' That's the treatment we apply to foreign investors. We ask them to contribute to the housing stock. And so too we're saying to those who want to get the benefits of negative gearing, 'You've got to help us add to the housing stock in this country,' because, fundamentally, boosting homeownership is about boosting housing supply.
The measures in these bills are measures that have been supported by research that's been done by the Grattan Institute and by e61, supported by experts such as Chris Richardson and Saul Eslake, supported by work that came out of the Economic Reform Roundtable the Treasurer hosted the cabinet rooms in August last year, which focused on the challenge of intergenerational inequity and the importance of reining in these tax concessions. We have seen over the course of the last two decades the benefits of negative gearing and the capital gains tax discount in the order of $700,000 for those in the top one per cent but only in the order of about $10,000 for the typical Australian taxpayer. So these are benefits that have been heavily skewed towards the most affluent and which have tilted the housing market against those who want to get a home of their own.
Labor is backing the policy of homeownership. This used to be a bipartisan goal. After World War II, Curtin and Chifley put in place measures that began to grow the homeownership rate - measures that were supported by the Menzies Government, which oversaw a dramatic increase in the homeownership rate over that postwar decade and a half. But those opposite, much as they would like to claim that they're the heirs to Robert Menzies, are in fact pursuing policies that have helped to drive down the homeownership rate. I call on them to back these bills - not just to back a tax cut for all Australians but to back the reform that was called for by Joe Hockey: a reform which sits proudly in the homeownership legacy of the Curtin, Chifley and Menzies Governments. If they squib this chance then they will give away the opportunity to again show that they are on the side of those buying their first home, not investors buying their fifth home.
We've seen over recent weeks the difference between backing tax reform in the abstract and backing tax reform in the particular. We've seen many commentators who have called on governments to do the hard thing, to step forward and do real tax reform, suddenly go to water when a serious tax reform is put on the table. These are tax reforms that follow recommendations that have been called for by experts. These are tax reforms that deal with the most pernicious problems that have developed through the combination of negative gearing and the capital gains tax discount.
Returning the capital gains discount from the 50 per cent arbitrary tax discount to inflation indexation will be better for some categories of investments. Investments that are earning less than twice the inflation rate will be better off under inflation indexation. That means that someone, for example, who'd invested in the All Ordinaries Index - in an index fund to track the All Ordinaries Index from 1999 through to 2026 - would be better off under inflation indexation than they are under the 50 per cent discount. That means that someone who invested in units that rose the average price of units in Australia over that same period would be better off with inflation indexation than the 50 per cent discount.
Who would not be better off? Well, someone who bought Bitcoin; a Bitcoin investor would clearly be better off under the 50 per cent discount. But do we really want people investing in Bitcoin rather than in the All Ordinaries Index? Do we really want people to be speculating rather than backing Australian companies by buying an index of Australian shares, by buying an index of the Australian stock market?
These reforms return the system to the way it operated from 1985 to 1999, a period in which the stock market grew strongly and a period which included the strongest productivity growth decade in the postwar era. These are pro-productivity measures, and they sit strongly alongside the productivity package that has been brought forward by the Treasurer in this Budget.
It is the productivity package which sees further reforms to boost National Competition Policy, collaborating with states and territories. It will save tradies $1,600 by ensuring that they don't have to pay to buy Australian standards and will boost productivity by reducing by six months the time taken for skilled workers to get on the tools. You can debate the number of skilled workers who come into this country, but what I think all of us in this House should be in favour of is getting skilled workers working in skilled occupations as quickly as possible.
This government's productivity work includes scrapping non-compete clauses for 9 out of 10 workers, which will take effect from 1 January next year. Right now, non-competes are stopping workers from moving to a better job and stopping entrepreneurs from starting up a new business. By getting rid of non-competes for 9 out of 10 workers, we'll help to grow productivity.
I'm proud to be part of a party that is sitting firmly in the Labor legacy - the Curtin, Chifley, Hawke, Keating, Rudd, Gillard legacy - of making hard decisions, hard reforms, and leaving the country better off for it. I commend the bills to the House.
Ends