The government is rushing to fill the policy void at the centre of its poor start to the election year, with the new head of the Department of Prime Minister and Cabinet, Martin Parkinson, taking over responsibility for coordinating Malcolm Turnbull’s long-awaited tax package from the treasurer’s tax unit.



The shift happened about three weeks ago, around the time the prime minister abandoned the idea of raising the goods and services tax. The cabinet secretary, Arthur Sinodinos, is now also heavily involved in the “whole of government” process, which could see some tax policy announced within weeks, well before the May budget.

Government sources said Turnbull and the treasurer, Scott Morrison, had agreed the previous process had not been working well and that all ministers and relevant government departments needed to be working with the same information, and with all available information.

Asked about the process change on Friday, Turnbull confirmed Parkinson’s role.

“Yes, Dr Parkinson is closely involved, as indeed is the secretary of treasury as indeed is the treasurer as indeed I am, as indeed are all the ministers ... I am leading a cabinet government. We consider these issues carefully,” he said.

With speculation mounting about a double dissolution election in July, Turnbull did not rule out the options but said voters should expect a poll “in the normal time” between August and October.

Asked about a pre-budget release of tax policy, the prime minister said the government would be releasing “a range of policies” in the lead up to the budget.

After a week in which the prime minister stumbled both in his scare campaign against Labor’s announced negative gearing changes and in his signalling about its own plans on capital gains tax changes, senior sources believe the government needs to announce tax policy as soon as it is ready.

Morrison has suggested the government could unveil changes to superannuation before the budget but some in the government now believe there needs to be a broader announcement.

The new tax package will be part of an election pitch based on steady, careful economic management rather than bold policy upheaval, grounded in the idea that the electorate does not want radical change.

Contrary to the pronouncements by Morrison that all money raised from closing tax loopholes must be spent on personal income tax cuts because the Coalition did not “tax and spend”, some of the revenue from the government’s tax changes, and from expenditure cuts, will also be spent on deficit reduction and – as revealed by Guardian Australia this week – on providing interim funding to the states for hospitals, on the proviso that they enter into negotiations for longer term efficiency reforms.

Likely elements of the new tax package include a cap on the amount of losses that can be claimed through negative gearing – a policy that has for some time been opposed by some on the backbench because it would by definition hit existing investors. Other measures could be a lower cap on the amount individuals can contribute to their super at the subsidised tax rate, changes to capital gains tax for superannuation funds, changes to tax deductions and some increase in tobacco excise.

A minority of Coalition backbenchers, including Senator Cory Bernardi, are now threatening a “campaign” against any government change to negative gearing on the grounds that it would confuse the Coalition’s attack on Labor’s policy and hit “mum and dad” investors. The options remains under active consideration, despite the threatened “campaign”.

Government sources have expressed frustration that work on many tax options had not been done before the leadership change because they had been ruled out by the former prime minister, but Turnbull also abandoned the process of issuing a discussion paper on reform options – which might have put some parameters on the tax policy debate.

This week Turnbull stumbled by claiming in parliament that “increasing capital gains tax is no part of our thinking whatsoever” when the government was considering halving the capital gains tax discount for superannuation funds. He clarified that he had meant no change to capital gains tax as it applied to individuals.



And the government’s message was muddled when the assistant treasurer, Kelly O’Dwyer, claimed Labor’s policy would “increase the cost of housing for all Australians”, when Turnbull’s attack had claimed house prices would be “smashed”. O’Dwyer said she had meant that the price of new houses – for which negative gearing would still be allowed under Labor’s plan – would increase.

Both the treasury department and the prime minister’s department would normally be involved in major policy development, but giving the the prime minister’s department the lead coordinating role means it is involved in every idea from the outset.