By: Michael Crooks
The Albanese Government’s new budget aims to ease pressure on Australians
On Tuesday 12 May, the Albanese government delivered its fifth budget.
It comes at a time of increasing economic pressure for many Australians, with rising costs for essentials amid a global oil crisis, and elevated interest rates.
“War in the Middle East has been pushing up prices, pushing down growth, and punishing Australians,” said Mr Chalmers.
“But how we respond is up to us. This budget is ambitious in the face of adversity.”
Relief
The budget is focused on delivering cost-of-living relief, housing affordability and supply, national security, energy security, and productivity.
“It makes the tax system fairer and stronger for workers, businesses, first home buyers and future generations.”
Tax
The budget includes a new tax break called WATO – Working Australians Tax Offset.
It will provide an extra tax cut of up to $250 a year (increasing the tax-free threshold to $19,985). It will come into effect from the next tax year (2027-28).
Meanwhile, individual tax rates announced in last year’s budget will begin this year, on July 1.
The lowest tax bracket (between $18,201 and $45,000) will drop from 16 per cent to 15 per cent, giving lower income earners up to an extra $268 a year.
Further, workers will be able to use a $1,000 instant tax deduction (no receipts needed), producing a guaranteed average annual saving of $205. The instant deduction is for those 6.2 million workers who claim under $1,000 in work-related expenses.
Homes
Through a major overhaul of “investor tax”, the government says the market will finally be tilted toward first home buyers.
The government estimates that these measures (see below) will help 75,000 Australians buy their first property.
Also, to encourage the building of new homes, the government is spending $2 billion over four years on critical infrastructure.
“This funding will support up to 65,000 homes over the decade and brings the Government’s total investment in housing‑enabling infrastructure to $6.3 billion,” said a government statement.
There will also be an overhaul of planning and zoning regulations so homes can be approved and built more quickly.
(The government is also extending its ban on foreign buyers purchasing any established homes until mid‑2029.)
Investor tax overhaul
The first big change is to negative gearing. In what critics have described as a “broken promise” by the Coalition, the Albanese government has overhauled a system long prized by investors.
From the next financial year, investors can only negatively gear a property if that property is a brand new home (not a pre-existing one).
For those who currently negatively gear a rental property, nothing changes, and their negative gearing can continue.
Negative gearing enables investors to reduce their taxable income by claiming the difference between their expenses (mortgage repayments and other costs), and the rental income.
The other big change is to Capital Gains Tax. Up until now, there has been a 50 per cent discount on CGT (the taxing on any profit when an investment is sold). From the next financial year, the government is scrapping that discount for new investments, though the purchase price will be indexed for inflation, softening the blow a little. (The reforms apply to gains made after July 1, 2027.)
Mr Chalmers admitted that the changes to the system, which have long been geared toward investors, were “contentious”.
“There’s no use pretending otherwise, but it’s the right thing to do,” the Treasurer shared.
“The easiest thing that we could have done from a political point of view would be to see these challenges in the housing market, particularly for young people, and to see the issues in the tax system, and to leave everything exactly as it was.”
Homelessness
The government is investing $59.4 million to help those at risk of homelessness. The funding will provide social housing for over 4,000 young at-risk people aged 16–24.
The budget will also release a further $100 million from the Housing Australia Future Fund to improve the quality of housing for Indigenous Australians living in remote communities.
Fuel crisis
As most Australians would be aware, the fuel excise has already been halved amid the oil crisis, and the government will invest $10 billion to strengthen Australia’s fuel security.
Small business
The ATO is “streamlining” access to temporary relief from tax obligations until the end of the current financial year.
This includes more generous payment plans for tax, support in varying pay as you go (PAYG) instalments (when taxable income drops), and a new dedicated way for businesses to access relief.
Defence
The government is giving the military $53 billion over 10 years to modernise the defence force. This will include investing in drone and counter-drone technologies.
“Road of Reform”
Treasurer Chalmers claimed that no other budget in the 2000s has set out this much “responsible repair” and economic reform.
“Tonight, we choose the hard road of reform, not the path of least resistance,” Mr Chalmers told Parliament.
“By responding to the pressures Australians confront today. And fulfilling our obligations and responsibilities to the generations to come.”
Article supplied with thanks to Hope Media.
About the author: Michael Crooks is a senior journalist and former news editor of Who magazine. His work has appeared in People, Marie Claire, The Daily Telegraph, Herald Sun, news.com.au, Qantas magazine and more.
Feature image: Canva
