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The journo who scooped everyone on today’s ‘crisis’ budget · The Front

• 0:05
  Speaker 1: From the Australian. Here's what's on the front. I'm Claire Harvey.
• 0:08
  Speaker 1: It's Tuesday May twelve, twenty twenty six. There's fear and
• 0:14
  Speaker 1: confusion among the ISIS brides remaining in Assyrian camp. That's
• 0:19
  Speaker 1: an exclusive in The Australian today by our reporter Amanda Hodge.
• 0:23
  Speaker 1: Seven Australian women and eleven children who remain in al
• 0:26
  Speaker 1: Roje camp thought they'd be traveling with the four women
• 0:30
  Speaker 1: and their kids who arrived home last week to be arrested.
• 0:35
  Speaker 1: It's Federal budget day and today we're getting straight to
• 0:38
  Speaker 1: the point with the bits you need to know and
• 0:40
  Speaker 1: what to expect. Economics editor Matthew Cranston has been breaking
• 0:45
  Speaker 1: all the big scoops and today in The Australian he's
• 0:48
  Speaker 1: revealing the average worker will pay an extra four hundred
• 0:51
  Speaker 1: and forty dollars in tax in twenty twenty seven thanks
• 0:54
  Speaker 1: to bracket creep as we all move up the tax scales,
• 0:58
  Speaker 1: even as the Treasurer hands back an average of two
• 1:02
  Speaker 1: hundred and fifty dollars to everyone with a job. Matt's
• 1:06
  Speaker 1: here in just a moment, if you have a job,
• 1:16
  Speaker 1: you'll be getting a two to three hundred dollar present
• 1:19
  Speaker 1: from the Federal treasure at Jim Chalmers in your next
• 1:22
  Speaker 1: tax return. That's been the biggest budget scoop so far
• 1:26
  Speaker 1: and it was delivered by The Australian's own economics editor,
• 1:29
  Speaker 1: Matt Cranston.
• 1:30
  Speaker 2: Report in The Australian this morning that working Australians could
• 1:34
  Speaker 2: get two to three hundred dollars off their tax bill
• 1:37
  Speaker 2: the multi billion dollar cent apiece of Jim Chalmers's budget
• 1:40
  Speaker 2: next Tuesday, and that's on top of tax cuts that
• 1:43
  Speaker 2: are already legislated.
• 1:45
  Speaker 1: Matt, I'm looking forward to getting my hopefully three hundred
• 1:48
  Speaker 1: dollar present from Jim Chalmers. When I put my tax in,
• 1:52
  Speaker 1: I was planning to go down and spend that at
• 1:53
  Speaker 1: Mega Cosmdica or maybe take my husband out for dinner.
• 1:56
  Speaker 1: Is that what the Treasurer wants me to do with
• 1:58
  Speaker 1: that money question?
• 2:00
  Speaker 3: He wants you to be more encouraged about your job
• 2:04
  Speaker 3: and your hard work at The Australian and Claire. That's
• 2:07
  Speaker 3: the sort of the symmetry in the message is that
• 2:10
  Speaker 3: it's a sort of a boost and incentivization.
• 2:13
  Speaker 4: For you to work, but also a little bit maybe of.
• 2:16
  Speaker 3: A disincentive to go and take some of the money
• 2:19
  Speaker 3: you've earned and go and risk it.
• 2:22
  Speaker 4: In putting it in assets or capital.
• 2:26
  Speaker 1: Okay, so here's a few other things that we already
• 2:28
  Speaker 1: know about the budget. There'll be a fifteen billion dollar
• 2:30
  Speaker 1: cut to the National Disability Insurance Scheme over the coming
• 2:34
  Speaker 1: four years. Older Australians will lose their higher private health
• 2:37
  Speaker 1: insurance rebate. The government's creating a seventy four million dollar
• 2:41
  Speaker 1: National counter Terrorism Online Center. If you have workplace related
• 2:46
  Speaker 1: expenses of less than one thousand dollars to claim, you'll
• 2:48
  Speaker 1: be able to do so without receipts. If you're buying
• 2:51
  Speaker 1: an electric vehicle, you'll lose some of your discount on
• 2:53
  Speaker 1: the fringe benefits tax. There'll be a return of a
• 2:56
  Speaker 1: COVID or a business tax right off. That was another
• 2:58
  Speaker 1: Matt Cranston scoop. There's a ten billion dollars spend on
• 3:02
  Speaker 1: a fuel security package, including an increased fuel stockpile, and
• 3:07
  Speaker 1: there'll be an extra fourteen billion dollars for defense.
• 3:10
  Speaker 5: The Defense Minister is justifying the weapons spend in a
• 3:13
  Speaker 5: cost of living crisis as superpowers like.
• 3:16
  Speaker 4: China ramp up their presence in the region.
• 3:20
  Speaker 1: So that's most of what we already know let's talk
• 3:23
  Speaker 1: about what we can expect, Matt. The federal budget will
• 3:27
  Speaker 1: have more new savings measures than new spending.
• 3:30
  Speaker 5: Today, will also cut negative gearing and capital gains, tax concessions.
• 3:34
  Speaker 1: Taxes on family trusts increased.
• 3:36
  Speaker 2: The young people feel like they're not getting a fair
• 3:38
  Speaker 2: crack at the moment.
• 3:43
  Speaker 1: Let's start with negative gearing. This is where if you
• 3:45
  Speaker 1: own an asset like an investment property, you can deduct
• 3:48
  Speaker 1: from your overall tax build the losses you make on
• 3:51
  Speaker 1: that asset. So let's say you own a flat that's
• 3:53
  Speaker 1: rented out to someone else, but the rent doesn't cover
• 3:56
  Speaker 1: all your expenses, you're making a loss. When you come
• 3:59
  Speaker 1: to do your TACH return, you note that down and
• 4:01
  Speaker 1: you can deduct that loss from your taxable income like
• 4:05
  Speaker 1: your salary. So, Matt, what do we think the treasure
• 4:08
  Speaker 1: is going to change about that?
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  Speaker 4: And why?
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  Speaker 3: Well, you can't do it anymore simple as that. I
• 4:14
  Speaker 3: think you'll probably get maybe a year where you can
• 4:17
  Speaker 3: still do it. There will be tweaks around exemptions and
• 4:20
  Speaker 3: that sort of thing, but basically it's the end of
• 4:22
  Speaker 3: that era of writing off the rental losses against your income.
• 4:27
  Speaker 1: Why doesn't the government want me to do that anymore.
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  Speaker 3: Some people will think this is really strange because a
• 4:35
  Speaker 3: lot of people who are negatively gearing are actually young people.
• 4:40
  Speaker 3: That's how they get into starting to create wealth. So
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  Speaker 3: this is strange because it's sort of like, well, they
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  Speaker 3: talk about the intergenerational inequality thing, and it's like, well,
• 4:50
  Speaker 3: now they're cutting off a wealth creation tool that older
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  Speaker 3: rich people used when they were thirty or forty to
• 4:58
  Speaker 3: get wealthy, and now they're sitting in this positively geared
• 5:02
  Speaker 3: territory with lots of high valued assets because over time
• 5:06
  Speaker 3: they grow in value.
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  Speaker 5: Experts are predicting a jaw dropping two hundred percent rise
• 5:11
  Speaker 5: in house prices in Brisbane and surrounding regions. It comes
• 5:15
  Speaker 5: after values have already surged up.
• 5:17
  Speaker 4: To so that's one side of looking at it.
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  Speaker 3: The other is that they see negatively gearing as a
• 5:23
  Speaker 3: route where it's basically a subsidized way for people to
• 5:29
  Speaker 3: become investors and speculate on the property market. But the
• 5:33
  Speaker 3: vast majority of people only have one negatively geared property,
• 5:36
  Speaker 3: so it's a little bit of a mystery. But I
• 5:39
  Speaker 3: think that's where Jim Chalmers feels as though he's trying
• 5:43
  Speaker 3: to create fairness is to cut out these people who
• 5:46
  Speaker 3: have multiple properties and prevent speculation and these big price
• 5:51
  Speaker 3: movements upward which stop younger owner occupies from getting into
• 5:55
  Speaker 3: the market.
• 5:56
  Speaker 1: Let's talk about capital gains tax. This is about when
• 5:59
  Speaker 1: you sell an asset. So you've owned a flat awesome
• 6:03
  Speaker 1: shares and if you've owned it for more than twelve months,
• 6:05
  Speaker 1: you only get taxed on fifty percent of the profit
• 6:08
  Speaker 1: you make when you come to sell it. The government's
• 6:11
  Speaker 1: changing that as well as far as we know. What
• 6:13
  Speaker 1: do you think that change is going to be.
• 6:16
  Speaker 3: It'll be changed to inflation indexation. You lose to fifty
• 6:19
  Speaker 3: percent discount, and then depending on what inflation did over
• 6:23
  Speaker 3: the life of the asset that you own, that will
• 6:27
  Speaker 3: be used on the cost base when you work out
• 6:30
  Speaker 3: the capital gains tax when.
• 6:32
  Speaker 4: You sell it.
• 6:33
  Speaker 3: Now, we wrote very early on that it would be
• 6:37
  Speaker 3: proportionally adjusted. So that means and let's see if I
• 6:41
  Speaker 3: can explain this as simply as I can, I.
• 6:43
  Speaker 1: Feel like you taking you back to fourth year economics here.
• 6:47
  Speaker 3: Well, it's more fourth year accounting rather than economics. Let's
• 6:51
  Speaker 3: say you held an asset for eight years before budget night,
• 6:55
  Speaker 3: and then two years after budget night you sell it
• 6:58
  Speaker 3: What they're going to do is basically say, right, go
• 7:02
  Speaker 3: and work out ten years using the fifty percent discount,
• 7:06
  Speaker 3: and then go and work out ten years using inflation indexation.
• 7:11
  Speaker 3: Get two numbers, and then multiply them by the amount
• 7:16
  Speaker 3: of years that you had that asset before and after budget.
• 7:20
  Speaker 3: So in the first number, they'll multiply it by point
• 7:23
  Speaker 3: eight i e. Eight years, and then the second number
• 7:26
  Speaker 3: they'll multiply it by point two two years. And then
• 7:29
  Speaker 3: they get those two numbers and they work out that's
• 7:32
  Speaker 3: what tax you pay.
• 7:33
  Speaker 1: I hope that sounded that sounded very impressive. I would
• 7:35
  Speaker 1: pass you for fourth year accounting for sure, a.
• 7:37
  Speaker 4: Bit boot for accountant, so I can tell you that.
• 7:40
  Speaker 1: I'm regretting my Arts degree. Now. Is this about making
• 7:43
  Speaker 1: investing in assets less appealing?
• 7:46
  Speaker 3: If you talk to anyone in real estate, even if
• 7:48
  Speaker 3: you're talking to a left wing Labor Party supporter, and
• 7:52
  Speaker 3: you ask them what happens, I think they're going to
• 7:56
  Speaker 3: have to admit that this is going to be a
• 7:58
  Speaker 3: hit to the property market. You're going to have fewer buyers,
• 8:02
  Speaker 3: fewer sellers. I think probably rents will go up because
• 8:06
  Speaker 3: if you lose that benefit of negative gearing, how do
• 8:08
  Speaker 3: you make it a worthwhile investment. Well, you've got to
• 8:10
  Speaker 3: make it positive, so you increase the rents to try
• 8:14
  Speaker 3: and get a positive yield. There's lots of changes like that. Okay,
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  Speaker 3: what else could it do? Well? It could mean that
• 8:20
  Speaker 3: the investors who are speculators go, well, dump it, get
• 8:24
  Speaker 3: rid of it, don't want it, and then who fills
• 8:26
  Speaker 3: that void? Maybe its owner occupies, Maybe the price comes down.
• 8:30
  Speaker 3: Maybe Jim Charmers wants the price to come down, which
• 8:33
  Speaker 3: should be a really interesting question to ask him. Does
• 8:36
  Speaker 3: he think that lower house prices are a good thing
• 8:39
  Speaker 3: or a bad thing.
• 8:43
  Speaker 5: We also need to make the housing market fairer so
• 8:46
  Speaker 5: that more Australians can get a toe hold in the
• 8:48
  Speaker 5: housing market and therefore a toe hold in our economy.
• 8:54
  Speaker 1: Do you think over the long term, given the government's
• 8:57
  Speaker 1: goal it's always talking about intergeneration equity and that it's
• 9:01
  Speaker 1: a shocking scandal that young people are not able to
• 9:05
  Speaker 1: get themselves their first home. Let's say, looking twenty years
• 9:09
  Speaker 1: out or thirty years out. Is this potentially going to
• 9:12
  Speaker 1: be something that ticks the government's box, which is making
• 9:16
  Speaker 1: investing in property as a non occupier as an investor
• 9:20
  Speaker 1: less attractive.
• 9:21
  Speaker 3: I'd probably edge towards saying yes, it will make it
• 9:25
  Speaker 3: less attractive, because I think a lot of people who
• 9:29
  Speaker 3: buy do negatively year like when they've come into it.
• 9:34
  Speaker 3: And like, if you're taking a very purest economic angle
• 9:38
  Speaker 3: to all this, you might say, well, no industry should
• 9:42
  Speaker 3: be subsidized. We don't give money to people to go
• 9:45
  Speaker 3: and build cars illustrator anymore. Why are we giving extra
• 9:50
  Speaker 3: tax incentives and money to build houses? And it's like, well,
• 9:55
  Speaker 3: because we want more houses. So then do you keep
• 10:00
  Speaker 3: being incentives there or do you get rid of them?
• 10:03
  Speaker 3: And don't forget Claire that in nineteen eighty five Paul
• 10:07
  Speaker 3: Keating got rid of negative gearing and had to reinstate
• 10:11
  Speaker 3: it two years later because of political pressure. So maybe
• 10:14
  Speaker 3: Jim Charmers, whose hero was Paul Keating, may come across
• 10:18
  Speaker 3: the same lesson that his hero came across in the
• 10:21
  Speaker 3: nineteen eighties.
• 10:22
  Speaker 1: Okay, let's talk about trusts. About one point eight million
• 10:25
  Speaker 1: Australians use a trust to manage their income and assets.
• 10:29
  Speaker 1: That includes farmers, tradees, investors, and also some people who
• 10:33
  Speaker 1: earn salaries, and about a quarter of them are high
• 10:36
  Speaker 1: income earners. The point of the trust is to minimize
• 10:39
  Speaker 1: tax spreading it to other beneficiaries, like other members of
• 10:41
  Speaker 1: the family. So let's say one member of the trust
• 10:44
  Speaker 1: is on the highest marginal tax rate because they're a
• 10:47
  Speaker 1: high earner. If they own some assets like shares, and
• 10:50
  Speaker 1: those shares earn income, they would normally have to pay
• 10:53
  Speaker 1: tax on that at they're very high marginal tax rate.
• 10:55
  Speaker 1: But if they split the benefit with other people who
• 10:59
  Speaker 1: were not on that, zita be high tax right through
• 11:01
  Speaker 1: a trust, less tax is paid overall. This is another
• 11:05
  Speaker 1: Matt Cranston scoop. What is going to happen to trusts
• 11:08
  Speaker 1: on Tuesday?
• 11:09
  Speaker 4: It's sort of like, no, you can't do that anymore.
• 11:11
  Speaker 4: Minimum thirty percent.
• 11:12
  Speaker 3: So you have to now pay a minimum of thirty
• 11:15
  Speaker 3: percent of that tax.
• 11:16
  Speaker 4: I mean, some people say it's a bit of a raw,
• 11:19
  Speaker 4: but it's legal.
• 11:20
  Speaker 3: Yeah, And so I think after budget night a lot
• 11:23
  Speaker 3: of people will have to restructure. If you've got a
• 11:26
  Speaker 3: small business or something, you'll probably have to put it
• 11:29
  Speaker 3: into a company like structure where you pay sort of
• 11:33
  Speaker 3: twenty five to thirty percent tax, so you're potentially paying
• 11:36
  Speaker 3: lower well not lower tax, but you know what I mean, Like,
• 11:40
  Speaker 3: if you're paying twenty five instead of the thirty.
• 11:43
  Speaker 4: Then that will probably be where people go.
• 11:45
  Speaker 3: And I think the government will probably give some support money,
• 11:49
  Speaker 3: you know, help you pay for your accounting or your
• 11:51
  Speaker 3: financial advisor, to help your restructure out of a trust
• 11:54
  Speaker 3: into a company. It's about I think at least one
• 11:56
  Speaker 3: point one million people individuals who benefit from trust. So
• 12:01
  Speaker 3: a lot of people should be thinking about this and
• 12:03
  Speaker 3: reading about it in our newspaper.
• 12:06
  Speaker 4: Yeah, of course.
• 12:06
  Speaker 1: And is the point of the change here just to
• 12:09
  Speaker 1: call back some revenue that the government thinks that this
• 12:11
  Speaker 1: has become a distortion and that people are basically dodging
• 12:14
  Speaker 1: tax even though it's legal, and that needs to stop.
• 12:16
  Speaker 4: Is that the point?
• 12:17
  Speaker 3: Yeah, Well, I don't want to put words in the
• 12:19
  Speaker 3: treasure's mouth, but clearly there's a little bit of everything here,
• 12:22
  Speaker 3: a little bit of getting some revenue back, maybe a
• 12:25
  Speaker 3: little bit of class warfare, stuff like who do you
• 12:28
  Speaker 3: know as a trust usually sort of people who are
• 12:30
  Speaker 3: on a pretty good wicket, right.
• 12:32
  Speaker 4: So there's a little bit of that.
• 12:34
  Speaker 3: And the other thing too, is it fits into this
• 12:37
  Speaker 3: whole narrative that charmers in Albanizi are very much trying
• 12:42
  Speaker 3: to push out there now, which is this rebalancing If
• 12:45
  Speaker 3: I can put in an advertic it comes of income
• 12:48
  Speaker 3: capital and asset capital. Now trusts. A lot of that
• 12:52
  Speaker 3: can be just straight labor income going into the trust,
• 12:56
  Speaker 3: but there's also a little bit of a narrative around well,
• 12:59
  Speaker 3: the trust might own assets and get income from those assets,
• 13:03
  Speaker 3: and so we need to tax those assets in a
• 13:05
  Speaker 3: different way. Are more their maybe way or rebalanced way.
• 13:10
  Speaker 3: But of course a lot of people are going to
• 13:11
  Speaker 3: be up in arms about all this.
• 13:13
  Speaker 1: They're exempting farmers. You've reported from this change farmers trust.
• 13:17
  Speaker 1: Is that because they're worried about one nation.
• 13:19
  Speaker 4: Well, that's a good point. I actually didn't think about that.
• 13:22
  Speaker 3: My thinking around that was that trusts were essentially in
• 13:26
  Speaker 3: the very beginning, I think, set up for farmers because
• 13:30
  Speaker 3: farmers have things like succession planning.
• 13:33
  Speaker 4: Their home is their business.
• 13:34
  Speaker 3: You know, their farmers, where they live, the son and
• 13:37
  Speaker 3: daughter probably do the harvest and the planning. It's a
• 13:41
  Speaker 3: really legitimate structure for farmers, and it would make it
• 13:45
  Speaker 3: very difficult, I think, to try and include farmers in that.
• 13:49
  Speaker 3: I mean, the farmers would go nuts, I think if
• 13:52
  Speaker 3: you stop them from using the trust structure, because it's
• 13:55
  Speaker 3: also really important for succession planning too, and I reported
• 13:59
  Speaker 3: that the testamentary trusts, which are set up for a
• 14:02
  Speaker 3: state planning, would be excluded too from that.
• 14:08
  Speaker 1: Labour's tried a bunch of these ideas before, as recently
• 14:12
  Speaker 1: as when Bill Shorten was leader, and has either lost
• 14:15
  Speaker 1: their nerve, or they haven't won the election, or it's
• 14:18
  Speaker 1: just has not come off. Why do you think they
• 14:22
  Speaker 1: think that it's different now.
• 14:24
  Speaker 3: So they've got a ninety four seat majority and they're
• 14:27
  Speaker 3: three years out from an.
• 14:28
  Speaker 4: Election, What the hell right now? Just have a crack
• 14:31
  Speaker 4: at it.
• 14:32
  Speaker 3: Maybe they truly believe that what they're doing is genuine reform.
• 14:36
  Speaker 3: And then the timing is sort of good in the
• 14:38
  Speaker 3: sense that there's a crisis, right.
• 14:41
  Speaker 1: We're going to hit them extremely hard over the next
• 14:44
  Speaker 1: two to three weeks. We're going to bring them back
• 14:48
  Speaker 1: to the stone ages where they belong.
• 14:51
  Speaker 4: In the meantime.
• 14:51
  Speaker 3: And I don't think this has sunk in to the
• 14:53
  Speaker 3: rest of the economy yet that Australia, its economy is
• 14:57
  Speaker 3: going to be hit quite badly from what we have
• 15:00
  Speaker 3: seen with the Middle East conflict. And I think as
• 15:04
  Speaker 3: that plays out, a lot of people will think, oh,
• 15:08
  Speaker 3: it's the crisis. It's the crisis. It's not Jim's fault,
• 15:10
  Speaker 3: it's not anyone's fault except the Strait of Amorz.
• 15:15
  Speaker 4: And so they might be thinking that in the fog.
• 15:17
  Speaker 3: Of war, in the cover of darkness, you can push
• 15:20
  Speaker 3: through reforms and big changes, and if it does have
• 15:24
  Speaker 3: negative consequences, you can sort of pin it on the
• 15:28
  Speaker 3: Strait of Amors and all the Middle East conflict. You
• 15:30
  Speaker 3: can even pin it, as I've seen some journalists do
• 15:34
  Speaker 3: on the Reserve Bank and just say well, they've increased
• 15:37
  Speaker 3: interest rates three times this year and the government can
• 15:41
  Speaker 3: sort of extricate itself from any blame. But I think
• 15:44
  Speaker 3: it's a dangerous political tactic because I think Australians actually
• 15:49
  Speaker 3: do care about their money and their budgets. They are
• 15:52
  Speaker 3: cultural worries as well. But I think any changes to
• 15:56
  Speaker 3: the way they try and create wealth, they look at
• 15:58
  Speaker 3: that and they remember that.
• 16:00
  Speaker 4: And of course it's pretty obvious broken promise.
• 16:03
  Speaker 3: Can you rule out any changes to negative gearing and
• 16:06
  Speaker 3: capital gains tats?
• 16:08
  Speaker 4: How hard is it for the fiftieth time? So they'll
• 16:11
  Speaker 4: have that maybe in the back of their mind as well.
• 16:13
  Speaker 3: Well.
• 16:13
  Speaker 1: Matt, the front team and I are packing up our
• 16:15
  Speaker 1: microphones and heading down to Canberra. I can't wait to
• 16:18
  Speaker 1: hang out with you in the lock up and get
• 16:19
  Speaker 1: all the answers.
• 16:20
  Speaker 4: On Budget Night. Thank you very much, Thanks glare See Bear.
• 16:27
  Speaker 1: Matthew Cranston is The Australian's economics correspondent. You can read
• 16:31
  Speaker 1: analysis from Matt and our whole team of experts on
• 16:34
  Speaker 1: Budget Night at the Australian dot com. Dot you and
• 16:38
  Speaker 1: come back to the front on Tuesday evening for our
• 16:41
  Speaker 1: full breakdown of everything you need to know.