Federal Labor dumps negative gearing policy backs tax cuts

Federal Labor has formally dumped its contentious negative gearing policy and officially dropped its opposition to the federal government’s stage three tax cuts for high income earners.

Anthony Albanese’s shadow cabinet agreed to the position after more than 18 month of fierce internal debate, the final position of which is likely to be controversial within the party’s membership base. Labor’s caucus formally endorsed the position on a Monday morning teleconference.

Federal Labor dumped several contentious economic policies at a meeting later on Monday.Credit:Alex Ellinghausen

The opposition went to both the 2016 and 2019 elections promising to halve the 50 per cent capital gains tax deduction and limit negative gearing to new properties only, attracting fierce resistance from the government and the property and construction industries.

The policy was among many highlighted in a review of the ALP election loss as one which exposed the opposition to a Coalition attack that would risk the budget, the economy and the jobs of economically insecure, low-income workers.

Heading off a potential attack from the Morrison government, Mr Albanese said a Labor government would deliver the same legislated tax relief to more than 9 million Australians as the Coalition.

In a statement he said Labor was providing “certainty and clarity” to Australian families.

“Our focus is on making sure Australia emerges from this crisis stronger and more resilient - with an economy that works for working families not the other way around,” Mr Albanese said.

“Over eight long years in government, the Coalition’s record is clear in the lives of everyday Australians: stagnant wages, insecure jobs, increased costs for health care and childcare, longer waits to see a GP, and a trillion dollars in debt.”

The stage three tax cuts are legislated to begin on July 1, 2024, and will cost an estimated $137 billion between then and the end of the decade. They will abolish the 37 per cent tax rate and apply a 30 per cent rate to all income between $45,000 and $200,000.

Labor supported the legislation for the tax cuts after the last election but, it argued, only because they were tied to the stage two tax cuts for low- and middle-income earners which began on July 1 last year.

However there had been a fierce internal debate about whether to roll them or alter them if they won government because Labor believes they unfair give an advantages to high income earners.

Supporters of Mr Albanese had cautioned him of the political risk involved in changing the policy, while several leading right faction figures had pushed for a hybrid model which would give lower income earners more and cap the cuts at $180,000.

Shadow treasurer Jim Chalmers, who has been a critic of the cuts in the past and once labelled them “offensive” said improving the budget was “all about growing the economy” and creating a society that is stronger after COVID-19 than it was before.

“It also means ensuring our broader tax system is fair and sustainable, especially when it comes to making sure that multinational corporations are paying their fair share of tax and we will have more to say about that,” Mr Chalmers said.

Rob Harris is the national affairs editor for The Sydney Morning Herald and The Age, based at Parliament House in Canberra

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