Grattan on Friday: Albanese government gives ground on tax, but how much will it have to cede on the NDIS?

Only a little more than a year into its second term and with Pauline Hanson turning politics upside down, the Albanese government finds itself in policy quicksand on three core issues: its budget tax reforms, its wrestle to curb the National Disability Insurance Scheme, and the electorally sensitive area of migration.

On Thursday the government announced changes worth $475 million over the forward estimates to its tax package, yet to be legislated. While the budget itself indicated there would be consultations with stakeholders about detail, the measures are seeking to allay the fierce post-budget backlash from vested interests and some commentators.

If anyone doubts Labor’s concern to smooth the passage for the tax legislation, they only have to note the alterations have been unveiled ahead of the report of the Senate inquiry into it.

Usually it would be the treasurer alone assigned to do the sweep up. But Prime Minister Anthony Albanese fronted Thursday’s news conference with Jim Chalmers, perhaps to make it clear he personally has been listening and taking account of feedback.

Some measures will be incorporated into the legislation that will be before the Senate in the coming fortnight, while others will wait.

Prime Minister Anthony Albanese and Treasurer Jim Chalmers address the media during a press conference in Sydney, Thursday, June 18, 2026.

Dean Lewins/AAP

The government says its changes mean “all 2.7 million active small businesses” will be eligible for the capital gains tax concessions. The threshold is being lifted from $2 million turnover to $10 million.

The government is also proposing special arrangements for start ups that are “innovative”.

In addition, it is seeking to put to bed the scare campaign about a “death tax” by exempting all kinds of testamentary trusts from its planned 30% tax on discretionary trust distributions. (The legislation currently before parliament doesn’t cover trusts – that will come later.)

The government will amend in the Senate its tax legislation to provide more certainty on detail – the current version leaves much up to the treasurer’s discretion.

In what will be an intense fortnight sitting beginning Monday, ahead of the winter parliamentary break, the government’s wish would be to get through both its tax legislation – encompassing reforms to negative gearing and capital gains tax, and including the Working Australians Tax Offset – as well as its NDIS reform legislation.

It is looking to the Greens as partners to pass the tax reforms (even though the Greens have criticisms of the negative gearing grandfathering) and to the Coalition to be the dance partner on the NDIS legislation.

There had been speculation about a possible opposition-Greens deal to extend both the Senate inquiry into tax (which the Coalition would like to do) and the inquiry into the NDIS (that the Greens want to run longer). But the prospect of such a deal seems to have faded.

The NDIS legislation sets the framework for a more restricted scheme, with its cost growing at only 2% annually over the next four years, rising to about 5% after that (compared to the present 10%).

The government says the measures in its bill will “fight fraud and stop rorts, slow rapid cost increases, [and] make eligibility requirements clearer”. The critics say they will worsen the lives of vulnerable people.

As happened with the government’s reform push last term, the states are reluctant to pull their weight in taking on sufficient responsibility as the Commonwealth cuts back. They are collectively jacking up. The federal government thinks (or hopes) this is posturing.

Australian Greens Senator Jordon Steele-John and NDIS advocates speak during a press conference at Parliament House in Canberra, Wednesday, May 13, 2026.

Lukas Coch/AAP

Equally, if not more, damaging for the government has been the evidence at the Senate inquiry, with heart-tugging stories of people potentially disadvantaged by the cutbacks to come.

Reform of the scheme will take years, so the government can expect a drawn out, concerted campaign for it to soften its stance. But the more it does so, and the longer it takes to put in place state government supports to fill gaps, the less the prospect of meeting the financial targets, especially that highly ambitious one of an annual cost increase of only 2%.

Reform of the NDIS is at the heart of the budget’s savings and slippage would have serious fiscal consequences.

Despite its hopes of securing the NDIS legislation in the coming sitting, the expectation is the government faces the prospect of having to accept a longer inquiry.

The reform task in migration is less acknowledged by the government, but also imperative. On Thursday the latest National Overseas Migration numbers for 2025 calendar year were released, a total of 301,000. The NOM is “the net gain or loss of population through international migration to and from Australia”.

Although it has come down from the stratospher…