Chalmers leaves door open for tax reform in May budget

When asked to preview what the 2026–27 budget would look like on ABC Insiders on Sunday (8 February), Treasurer Jim Chalmers said that the government would remain focused on its productivity agenda, and was considering possible next steps towards tax reform.

“The Budget will be about productivity. We’re working up a productivity package. There will be a savings package that we’re working on. We’ll consider whether more steps can be taken on tax reform,” he said.

“But overall, it will all be about lifting the speed limit on the economy, making sure we can grow quicker with lower inflation, attracting investment, dealing with intergenerational issues, and also continuing to get the Budget in better shape.”

Economists and policymakers have raised the alarm about Australia’s poor productivity growth and argued that substantive tax reform would be necessary to tilt the economy towards more productive activities.

Last year, accounting industry bodies welcomed comments from Chalmers, flagging that the government was open to considering tax reform. CPA and CA ANZ said reform would be necessary to address intergenerational inequity and productivity snags.

RBA deputy governor Andrew Hauser has also warned that Australia’s economy could have limited scope to grow without spurring inflation unless its productivity performance improves. Fronting parliament last Friday (6 February), RBA governor Michelle Bullock said these “capacity constraints” had contributed to the RBA’s decision to hike the cash rate in February.

Ahead of the budget, a recent inquiry into the capital gains tax (CGT) discount has also spurred debate on whether the current tax settings are fair and sustainable.

Last week, The Australian Financial Review reported that the Labor government was considering changes to the CGT discount in the lead-up to the May budget, according to an unnamed government source.

When asked if the government would consider winding back the CGT discount on ABC Insiders, Chalmers refused to confirm or deny Labor's stance. He simply noted that any further steps towards amending the discount would be a matter for Cabinet.

“We’ve got a tax policy already, and the major part of that is cutting income taxes 3 times. That is the primary focus of our efforts when it comes to tax.”

“I know that there are intergenerational issues in housing and in tax. We’ve got a big agenda to deal with those issues already, and any further steps that we would take to address some of those intergenerational equity issues would be a matter for Cabinet.”