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Australia is expected to announce one of its most significant housing and property tax reform packages in decades as part of the federal budget scheduled for release later on Tuesday. The centre-left Labor government is reportedly considering changes to capital gains tax concessions and negative gearing rules amid growing concerns around housing affordability and intergenerational inequality. Treasury projections indicate the budget deficit will narrow more than previously forecast due to stronger commodity-linked revenues, with the fiscal position improving by AUD 44.9 billion compared to earlier estimates. The budget is also expected to include additional defence spending, fuel reserve investments and savings measures linked to welfare reform. The proposals come as Australia faces elevated inflation, rising interest rates and growing pressure on household affordability.
Australia is preparing to unveil sweeping housing and investment tax reforms alongside a narrower-than-expected budget deficit as the federal government seeks to address affordability concerns, rising living costs and mounting fiscal pressures, according to reports emerging ahead of the national budget announcement scheduled later on Tuesday. Advertisement
Treasury projections released ahead of the budget indicated that deficits across the forward financial years are expected to be lower than previously forecast in December, with the overall fiscal position improving by AUD 44.9 billion due largely to stronger commodity-linked revenues.
Australian Treasurer Jim Chalmers stated in Canberra that the budget would contain a higher-than-usual level of savings and reform measures amid heightened global economic uncertainty linked to ongoing geopolitical tensions and energy market disruptions following the Iran conflict.
According to the Treasurer, the budget will contain five major policy packages focusing on housing and cost-of-living support, productivity measures, fuel security, tax reforms and government savings initiatives.
The centrepiece of the budget, however, is expected to be a major restructuring of property and investment taxation. Local media reports indicated that the government may move to reduce or abolish the 50 per cent capital gains tax discount currently available on assets held for more than one year. The proposed reforms could instead return to the pre-1999 system where inflation-adjusted gains were taxed.
Reports also suggested that the government may introduce limits on negative gearing, a tax mechanism that allows property investors to offset investment losses against taxable income.
Both the capital gains tax discount and negative gearing framework have faced longstanding criticism in Australia for encouraging speculative investment activity and concentrating housing ownership among older and wealthier investors, while younger households continue to face worsening affordability pressures.
Chalmers reportedly acknowledged growing public concerns regarding access to home ownership and broader economic participation, indicating that the government intended to respond to those concerns through the budget measures.
The proposals carry political significance as similar reforms had contributed to Labor’s election defeat seven years ago. This time, however, the government appears to be positioning the changes within a broader agenda focused on intergenerational equity and housing affordability.
Alongside housing reforms, the government is expected to allocate AUD 10 billion, equivalent to around USD 7.22 billion, towards establishing permanent state-owned fuel reserves following recent localised fuel shortages linked to the Iran war. The budget is also expected to include an additional AUD 53 billion in defence expenditure over the next decade, including AUD 14 billion within the current forecast period.
The government is simultaneously attempting to contain public expenditure growth amid persistent inflationary pressures. Planned reforms to Australia’s disability welfare programme are expected to generate savings exceeding AUD 35 billion over four years.
The fiscal measures come as the Reserve Bank of Australia continues tightening monetary policy. Interest rates have been increased three times this year to 4.35 per cent as policymakers attempt to contain inflationary pressures intensified by higher energy costs and geopolitical instability.
Source - Reuters
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