00:03Surprise, after endless speculation, we thought we knew what was going to be in this budget
00:07and we were in the right postcode, but there's a lot we didn't expect.
00:10Let's start with negative gearing and the capital gains tax discount.
00:14No surprise to see this has been reined in, it has long been in Labor's sights.
00:18And if you want to know why, just look what happened when John Howard made the capital
00:22gains tax discount more generous way back in 1999.
00:25Rental losses exploded, not because landlords were doing badly, but because all of this
00:30could come off your tax bill.
00:32And then when you sell up, you could make it all back and then some.
00:36Treasury says one in every three people paid less tax than if they'd never owned a rental.
00:41Tonight the government is declaring time on all of that, literally.
00:45If you have a property already, you can keep negative gearing it.
00:49But for future purchases, you can't use it to write down your wage income unless you
00:53invest in a new build.
00:55Any capital gains you've already made, keep the old discount.
00:58But for any new gains, the clock starts ticking from next year.
01:02And that's true even for homes bought before 1985, which until tonight were not subject to
01:08capital gains tax at all.
01:10From next July that changes.
01:12A grandparent who's held onto an old home for decades and is now renting it out, will
01:16start accumulating a tax liability for the first time.
01:19All of this means some investors will probably decide to sell up.
01:24But that's exactly what Labor wants.
01:26They say the policy will create 75,000 new homeowners over a decade, reversing the last
01:32decade of ownership decline.
01:34But every one of those new homeowners buys from an investor that has been chased out of
01:38the market by higher taxes.
01:40That's the trade-off at the heart of this policy.
01:43Labor could have created more winners if it hadn't grandfathered, but it would have created
01:47an equal number of losers.
01:49Now there's even more in this budget that we didn't expect.
01:52This does not just apply to properties.
01:54It applies to shares as well.
01:56But to make up for that, there are new incentives for businesses who take on risk, especially
02:00start-ups.
02:01There will also be a 30% minimum tax on discretionary trusts, which Labor is arguing are the preserve
02:08of the wealthy, who do get most of the benefit.
02:11And some of the money will come back to workers, in the form of a permanent tax offset of up
02:16to $250.
02:18But only for wages, not for investment income.
02:22That's the message of this budget.
02:23It's a declaration that the tax system is too generous to passive earners and too harsh
02:28on wage earners.
02:29Will that change?
02:30Not entirely, and less so thanks to all of that grandfathering.
02:34But this will reshape the tax system, that is if it survives the fierce debate to come.
02:39The starters gun on that has just been fired.
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