Originally published by Matthew Cranston of The Australian
02.03.2026
Treasury is pouring extra expertise and staff into its tax division to explore potential reforms to negative gearing, capital gains and corporate incentives, as the Albanese government eyes the May budget as the most politically opportune time to introduce changes before the next election.
As Treasury reprioritises its best minds to focus on tax, a Business Council of Australia survey has shown Australis is sliding down the global rankings of business competitiveness.
Australia slipped to position 21 in the Global Investment Competitiveness Index, nine positions behind Canada, whose Prime Minister Mark Carney will address parliament on Tuesday.
Mr Carney has introduced a “super-deduction” for businesses in Canada, reducing the country’s marginal effective tax rate on new investment to about half that of Australia’s.
While the Albanese government is considering options in the corporate tax space, it is also waiting on the best policy for reforms to negative gearing and the capital gains tax which sit in the personal tax area. The Australian understands Treasury is dedicating more staff to personal tax measures. It is understood some senior Treasury department experts have been enthusiastic for tax reform and are likely to support such measures such as an allowance for corporate equity. Other potential corporate tax reform ideas could include venture capital tax concessions, a permanent and expanded version of the instant asset write-off and a revival of the Covid-era loss carry-back offset. Sources close to Treasury say the balance between the strength of the political message and the complexity of administering the tax is vital.
The Australian reported that Treasury was examining new rules that would limit Australians to negatively gear a maximum of two investment properties. Treasury sees implementation problems with the two-property negative gearing policy.
While Australia slipped in overall business competitiveness, it remained stuck at position 38 out of 42 countries in terms of effective company tax rate and 32nd in terms of corporate tax complexity. Australia has fallen from 34th and 14th respectively in these two areas since 2019.
BCA chief executive Bran Black said events in the Middle East only amplified the need for Australia to be more competitive. “Investors compare jurisdictions side by side,” he said. “If other countries are making it simpler and more attractive to invest, making simple once-off changes won’t be enough on their own, we need to outpace and keep outpacing our main competitor countries.”
While Australia maintained second position in terms of trade competitiveness, after removing nuisance tariffs, Mr Black said reforms were needed in the area of taxation. “Australia’s trade success continues to be driven by significant policy reform across tariff reductions and trade agreements, whereas we fall down on regulation and business taxation, and so our ranking could surge with policy change in these areas,” he said.
Jim Chalmers has been meeting business leaders including bank chief executives and has discussed an alternative reform model to the criticised cashflow tax proposal released by the Productivity Commission last year.
“It’s not unusual this far out from the budget that the Treasury would be considering other options and other next steps, but they would, as always – any further steps along those lines would be a matter for cabinet in the usual way,” the Treasurer said.
Mr Albanese’s personal satisfaction rating among voters has slipped to 40 per cent from 47 per cent in October last year according to Newspoll, at the same time that inflation has turned higher, real wages have turned negative for the first time in more than two years and the Reserve Bank has raised interest rates for the first time since 2023.
As the federal deficit has more than tripled in the past year to more than $30bn and gross debt nudges $1 trillion for the first time, the Albanese government is searching for savings and is expected by some economists to be seeking new revenue measures.
The BCA noted in its latest report that Australia was more than twice as reliant on corporate income taxes as a share of all taxes than the average within the OECD.
“Countries with more competitive company tax systems achieve this through a tax mix that is balanced more towards efficient taxes so that the average economic burden of raising each dollar of revenue is lower,” the BCA said in its latest Global Investment Competitiveness Index report.
