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Malcolm Turnbull ends the open GST debate amid ongoing confusion

Prime Minister Malcolm Turnbull on Monday left no doubt about his intentions with the GST. Photo: James Brickwood Bill Shorten announced his party’s negative gearing policy at the NSW Labor conference at Sydney’s Town Hall at the weekend. Photo: James Brickwood

Malcolm Turnbull has moved to stem the government’s bleeding over a GST hike still favoured by some of his colleagues, declaring it will not be in the policy mix he will take to the election later this year.

It came after one of his cabinet members, Employment Minister Michaelia Cash, said on Monday evening the GST had not been “completely” taken off the table, as most people had understood.

In damage control over the internal confusion, Mr Turnbull used a morning press conference in Queensland where he was touring with his new Deputy Prime Minister designate Barnaby Joyce, to finally and decisively rule out the GST hike.

“I can assure you that the government will not be taking a proposal to increase the GST to the election,” he said.

“I have got no doubt people will be talking about GST for a long time. But the work we’ve done demonstrates that the so-called GST tax mix switch does not give you the economic dividend, the growth dividend, that would justify doing it.”

The new clarity ends months of speculation over the prospect of a 50 per cent jump in the 10 per cent impost, and also draws to a functional close the open-ended “public conversation” over tax reform in which all ideas were to remain on the table.

But the denial of the single largest revenue stream available to Canberra, at some $33 billion-a year, will force the government to examine some barely more palatable replacements to make up the revenue needed to furnish income tax cuts – and perhaps, a lowered company tax rate.

These options include trimming capital gains tax along with tightening negative gearing of investment properties – as the opposition has proposed – and winding in generous tax concessions for superannuation – again, as has been proposed by Labor. Another option is dramatically reducing workplace deductions

Coalition backbenchers are among the most nervous observers of this government’s policy meanderings given that their success in ruling out the GST had been driven by voter feedback. Losing the GST therefore has actually dialled up the pressure to reduce these tax expenditures.

Government MPs increasingly want their leaders to start laying down some genuine markers in the tax debate, aware that to date, it has been surrendered to sectional interest groups such as the Property Council of Australia – which plans to campaign against negative gearing and capital gains tax changes, and by a more courageous opposition.

Labor leader Bill Shorten has broken with the orthodox election year strategy for an opposition of making itself a small target to instead enunciate bold policies capable of improving revenue but also likely to draw government fire.

Having failed to corral the tax debate beyond appearing to back a larger GST, before the rug was pulled by Mr Turnbull, Treasurer Scott Morrison will address the National Press Club in Canberra on Wednesday to explain the likely direction of policy.

Acknowledging global volatility and “the challenges of a transitioning economy”, the new Treasurer will hint at a potentially harsh first budget in May.

“We need to get expenditure below revenue, not push revenue through higher taxes above expenditure,” he will say, according to extracts supplied.

Mr Shorten slammed the government’s approach describing it as “waffle” while warning against retrospective tax changes.

“Any decision that has any impact on current investments is a retrospective tax … it is imperative for investor confidence that governments don’t make changes to taxation arrangements without giving investors time to adjust.

“You can’t change the rules halfway through the game – which is why under Labor’s policy, all investments currently negatively geared or purchased before 1 July 2017 will not be affected.”

The comments reflect Labor’s suspicion that the government plans to reduce the capital gains tax discount or limit it to a set number of properties. Another option would be to limit the dollar amount of interest payments able to be offset against income – i.e. negatively geared.

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