Tax reform: Prime Minister Anthony Albanese signals no change to negative gearing, family trusts as stage 3 tax cut overhaul faces Senate fight

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Anthony Albanese has branded himself as “an honest person” despite his backflip on the stage 3 tax cuts, as he vowed his government remained supportive of current rules around negative gearing and family trusts.

Speaking on Sunday, the Prime Minister defended Labor’s changes to the tax cuts, which have sparked intense criticism from the Coalition who have denounced the move as a “broken promise”.

“I’m an honest person. I am upfront,” Mr Albanese told the ABC’s Insiders program.

“What I have done here is be very, very clear. And I’ve listened to people who are all saying, who are all saying to me, ‘Well, what are you doing about cost of living? What are the measures that you can put in place?’”

On the eve of Australia Day, the government abandoned its pledge to support the already-legislated tax cuts, revising the tax package by slashing the amount high-income earners received, while simultaneously bolstering support for low and middle income earners.

The changes, which overturn the original tax package which was legislated by the Morrison government, will still mean all workers will pay less income tax from July 1.

Mr Albanese confirmed the amended legislation would be released later on Sunday and introduced to parliament on Tuesday, before adding that he wanted the changes to be passed by Easter.

“Certainly, it needs to be passed during this existing session, so as to provide that easy transition for employers, the tax office, for others as well,” Mr Albanese said.

Pressed on why the government hadn’t taken the amendments to the 2022 federal election, the prime minister said the economic circumstances had demanded alterations of the stage three tax package.

“We listened to people and particularly low- and middle-income Australians are under financial pressure,” Mr Albanese said.

“What we needed to do was to look at what is the best way we can take pressure off cost of living without putting pressure on inflation.”

Government “comfortable” with negative gearing, family trusts

While the prime minister declined to label negative gearing as “fair”, Mr Albanese said the government was “supportive” of the current rules which he said were integral to encouraging housing supply.

“They are there to encourage investment … they’re not an equity measure,” Mr Albanese said

“There is a lot of analysis that says they encourage investment in housing and the key with housing is supply.”

Negative gearing refers to a situation where the cost of owning an asset, such as a rental property, outweighs the income it generates. Individuals who are negatively geared can deduct these losses against other income, such as wages, thus reducing one’s taxable income.

Asked about the current rules governing family trusts, which are also used as a means of minimising tax, Mr Albanese said his government was “comfortable” with the current arrangements.

The Coalition is yet to announce its position on Labor’s amended tax package and is set to finalise whether it will support or oppose the changes at a shadow cabinet meeting scheduled for Monday.

It is widely expected the Coalition will not stand in the way of offering relief to low and middle income earners, after Opposition Leader Peter Dutton declared that the Liberal Party would continue to be the “party of lower taxes”.

But on Sunday, the Coalition continued its criticism of the prime minister over his abandonment of the legislated tax package, with deputy Liberal leader Sussan Ley taking aim at Mr Albanese’s integrity.

“I’ll give you the hot tip Anthony Albanese, if you have to say “I’m an honest person” you probably aren’t an honest person,” Ms Ley said.

“Regardless of what anyone thinks about the tax changes, what is beyond dispute is we have a liar in the Lodge.”

Greens leader Adam Bandt, whose support will be instrumental if the Coalition opposes the changes, said his party was also yet to finalise its position but would put forward an “alternative proposal” as the legislation came before parliament.

“Our job now is to bring that pressure to bear … and see if we can get a better deal for low and middle income earners, bearing in mind . they’re going to continue to be in strife,” Mr Bandt told Sky News’ Sunday Agenda program.

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