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Chapter 1: What is the main topic discussed in this episode?
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The Treasurer Jim Chalmers has delivered his 2026 budget. He wants it to be seen as a visionary document, a budget that addresses the growing inequality between generations. But will changes to tax on housing really level the playing field? And will a tax cut really make you feel better off?
To discuss it all, I'm joined by Ian Verinder, our Chief Business Correspondent in the budget lock-up in Sydney. Hi Ian, again. Hi, how's it going? Year after year we're here. Going into this budget at the beginning of the year, Jim Chalmers would have had no idea that this would be a war budget.
This budget is ambitious in the face of adversity. It helps people with the pressures that are bearing down on the Australian economy as a consequence of the war in the Middle East at the same time as it reforms our economy for the future.
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Chapter 2: What are the key highlights of Treasurer Jim Chalmers' 2026 budget?
So let's consider now what the government is doing to sort of sweeten things. Now there is in this budget a new tax cut, a $250 tax offset. You better just explain that. Does everyone get it? How does it work?
Chapter 3: How does the budget aim to address generational inequality?
Just to note, it doesn't come in until 2028.
Taxpayers, all taxpayers get it. It's not a huge amount of money. No. It doesn't come cheap, though, because everybody gets it. And so when you multiply even a small amount of money by the entire population or the entire working population, it does add up. And so it looks like a lot of money being put out there. But, I mean, just $250. Yes. Yeah, it doesn't really make that much of it.
With rising inflation, that goes away pretty quickly, right?
Yeah, that's right. But it's not going to do a lot for, you know,
Chapter 4: Will the proposed tax cuts actually benefit taxpayers?
for the kind of price pressure that everybody's going to be under and it is, as you say, out there in the future.
Yeah, the government's introducing also this $1,000 instant tax deduction, so you don't need receipts. That's an added bonus.
Again, does it mean a lot? It won't mean a lot, I wouldn't imagine. And again, it's one of those measures that it doesn't sound like a lot of money, but you multiply it out by a lot of people and it does cost a reasonable amount. But I mean, I think what you're seeing here measures... that the government is trying to do to try and ease the cost of living.
So they're trying to do something, but you've had the Reserve Bank essentially say, whatever you do, please don't get out there and start splashing money around during this kind of environment because all that you're doing is fuelling inflation, which makes the central bank's job that much more difficult.
Yeah, and the Treasurer reckons that with these tax changes in the budget and the tax cuts previously, the Stage 3 tax cuts, an average worker will be $54 a week better off. Well, Ian, when I go into a supermarket every single time, I spend at least $50. You know, it goes away pretty quickly.
And look, when you're talking about smallish amounts of money like this, people don't notice it. And they're quite expensive kind of measures in many ways. But if you get an extra $50 in your pocket and you got it there for a couple of months, you don't actually remember that you had an extra $54.
Alright, well Ian, of course there was much said about this before the budget release and alas, there is some major changes to tax incentives for housing, that is negative gearing and the capital gains tax. Now this is the broken election promise put into print.
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Chapter 5: What challenges does the budget face in the current economic climate?
This is what about rebalancing wealth among Australians, is it? Just explain that.
Look, I think a lot of people forget what budgets are really all about. Now, we tend to focus a lot on if it's a surplus or a deficit. And you've had elections fought and won over whether you can deliver a surplus or a deficit and debt and deficit. But there's another really important aspect to budgets, and that is about the redistribution of wealth or the distribution of wealth.
And the taxation system is designed specifically to do that. And we've got a taxation system where rich people pay more tax than poorer people, or people earning more amounts of money, you know, salary, pay a higher rate of tax than people on lower salaries. That's the way our system works. And that distributes wealth between... between various layers of society.
Over the past, I guess, 25 years or so, since the turn of the century, our taxation system, the pendulum has kind of swung back and it's made people who are very wealthy already It's given them incentives to reduce their tax and to engage in investment activity that shifts the burden of the tax system from investing to workers.
So, you know, you've seen situations where, you know, fairly young workers in their 30s or so going flat out, earning an average weekly wage, you know, $80,000, whatever, $90,000 a year, paying far more tax than retirees who've got millions of dollars in superannuation and paying absolutely no tax on the earnings from that. So that's the superannuation side. Then you've had property tax.
incentives and property tax incentives, including negative gearing and of course, the capital gains tax discount that have been put in there specifically to encourage people to buy investment properties. What that's done is it's increased the demand for primarily the kind of properties that first home buyers would really be attracted to.
Investors are always looking for rental properties and, you know, at the lower end of the market and, you know, the traditional stomping ground for first home buyers. And Labor lost two elections, 2016 and 2019, over, you know, with policies designed to try and rein these tax breaks back in. And they, you know, they were soundly defeated and,
which you would have thought would have given them a message that, you know, this is just not on. Dump it, don't ever go near it again. And the Treasurer has decided to reintroduce it at this budget.
It would have been easy but wrong for a government like ours to see the way that the housing market is developing to see the way that pressures on young people are intensifying and to leave some of these structures unattended to.
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Chapter 6: How does the budget plan to tackle inflation and its effects?
Capital gains tax was introduced by Paul Geeting. And essentially his idea was you only paid the capital gains tax on the profit you made after inflation. So the real profit that you've made. That was changed in 1999 by the Howard government to basically have a 50% write-off. on your gain.
So if you made a million dollars profit from a property sale, you only paid tax on half of that, on 500,000, which seems to be incredibly generous. And you only had to have the property for 12 months. Now, it applies for not just property, but for all assets, including shares.
But when it comes to property, the idea is that now, from now on, it's going to revert back to that Keating-era regime where you will pay tax, but only on the gains that you've made after inflation.
Yeah. Okay. All right. And also that is grandfathered, right? So that's not going to affect people that are already in the system. Okay. All right. So just tell me then, in your view, will this work? The government says this is all about, you know, trying to solve the housing crisis, get more young people into housing.
Do you reckon this is going to work or do you think we should all be a bit sceptical?
Look, I think it's a step in the right direction and it will start to work, but it's not going to work next week or next year. It'll probably start to have an impact the further out it goes from the changes. You know, you're essentially clawing back money from investors. So I think it's going to take a while for us to see any real impact.
I mean, the property market is turning down at the moment anyway, because we've had three rate hikes recently. In the past three months. So, you know, both Sydney and Melbourne housing prices have turned south. Other capital cities are still, you know, still growing, but you'll probably see the national housing market start to weaken quite a bit over the next six months to a year.
But that's primarily because prices are already so high and you've got much higher interest rates.
Yeah. All right. And also the government is after the family trust, right?
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