Labor’s tax changes to face three-week senate inquiry amid brawl with business

Labor’s contentious tax changes will be pulled apart in a Senate inquiry next month, but the tight three-week deadline will sustain a political brawl over the government’s rush to pass new laws amid a broadening business backlash.

The government’s tax bill was automatically referred to a Senate committee on Thursday morning, shortly after Treasurer Jim Chalmers introduced it to the House of Representatives, under a requirement that laws commencing on July 1 be probed by a committee before then.

The Greens, who were preparing to support the laws in the Senate, said they would take the opportunity to push the government on why existing property investors will keep their tax breaks under grandfathering arrangements.

It sets up a second fight for Labor – this time over whether the concessions are too generous to investors – when the party is already meeting fierce resistance from the Coalition, start-ups and the business sector over its decision to extend capital gains tax changes to non-property assets.

Greens economic justice spokesman, Nick McKim, on Thursday described the bill as a “missed opportunity to finally put people ahead of profits and make the ultra-wealthy pay their fair share”.

“We will use this inquiry to examine how and why Labor decided to leave in place the vast majority of tax handouts for the ultra wealthy,” he said.

Labor had tried to wedge its opposition by grouping all four key elements of the budget’s tax package into one bill – the $250 income tax offset and $1000 instant tax deduction for workers, as well as its curbs on negative gearing and capital gains tax concessions.

The government said any tweaks could be included in a second set of laws later this year – such as potential carve-outs or concessions for start-ups or small businesses, who have been surprised by the extent of the changes and fear unintended consequences.

But Chalmers’ tax bill was unable to avoid an inquiry – despite Labor’s desire for the laws to sail through the Senate – because of a motion that passed earlier this month, under which senators agreed time-critical bills must be referred to a committee that reported back by June 22.

Greens leader Larissa Waters said significant changes to the tax system deserved scrutiny.

“We are hearing countless young people and first homebuyers express their frustration that Labor is letting wealthy property investors keep billions in handouts – an inquiry will help examine the consequences of Labor’s decision on grandfathering,” she said.

The Greens are still likely to pass the laws, but could use their leverage to negotiate on other issues given the government needs them to get the legislation through.

The three-week reporting period is unlikely to satisfy the Coalition, which has been pushing for a proper inquiry to probe the impact on Australian businesses. It could push to delay the inquiry’s reporting date, although it would need the Greens’ backing.

The Business Council of Australia is the latest stakeholder to push for a full inquiry while joining calls for the capital gains tax changes to be restricted to real estate.

Opposition Leader Angus Taylor continued his scathing assessment of the bill as Chalmers introduced it on Thursday morning, while Nationals leader Matt Canavan demanded Labor call an election to take the changes to the public.

“Frankly, Labor should have taken this to the people, and their refusal to do so says they are cowards, they are liars, and they are sending Australian small businesses down the stream,” Taylor said.

“We’re having discussions with anyone who will work with us to fight these toxic taxes, taxes that didn’t go to the Australian people, taxes which the government itself doesn’t even understand.”

The Coalition had threatened to withdraw its support for Labor’s National Disability Insurance Scheme legislation, which will allow the government to make significant cuts to the $56 billion program as its core budget saving, unless the tax laws were sent to an inquiry.

Taylor did not say on Thursday if the Coalition would now guarantee support for the NDIS laws, although the government has been expressing confidence that the opposition will come to the table.

Chalmers defended his decision to extend capital gains tax changes to all assets, not just property, as Labor MPs share their jitters about a business backlash in their electorates this week.

“It doesn’t make a lot of sense to replace one big distortion with another big distortion,” he told MPs in a closed-door meeting.

The treasurer described the laws as “responsible tax relief targeted for working people” while introducing them in the House of Representatives on Thursday.

“It means more money in the pockets of our nurses and teachers, tradies and truckies, and other Australians who earn salaries and wages,” he said. “It represents the most meaningful permanent increase to the effective tax-free threshold since Labor last increased it more than a decade ago.”

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