Treasury secretary Jenny Wilkinson has conceded Labor’s capital gains tax changes won’t be a simple reversion to what existed before September 1999 as Prime Minister Anthony Albanese claimed in Parliament.

Mr Albanese last week told the House of Representatives Labor’s plan to replace the 50 per cent capital gains tax discount would see a revival of an indexation model that had been in place from 1985 to 1999 which took into account inflation.

“We are also changing the capital gains tax regime to go back to 1999,” he said on May 26.

“We’re moving towards the system that was in place before 1999 to tax real gains, not nominal gains. “

But under questioning from Liberal senator Claire Chandler, Ms Wilkinson admitted Labor’s Budget plan didn’t include the pre-September 1999 model of allowing capital gains to be averaged out over five years.

“So, senator, that has not been part of the announcements that the Government’s made in relation to the tax package”, she told the Senate economics committee on Thursday. “That was not announced in the Budget.”

Ms Wilkinson also confirmed the capital gains tax from 1985 to 1999 did not impose a minimum 30 per cent tax on inflation-adjusted gains, as Labor is proposing to introduce from July 2027.

“No, it didn’t, Senator,” she said.

Finance Minister Katy Gallagher answered a question directed to Ms Wilkinson to argue Mr Albanese was simply outlining Labor’s capital gains tax changes would include a return to indexation.

“I think the PM was relating comments there, were relating to the indexation model approach that was there in pre-1999,” Senator Gallagher said.

Senator Gallagher accused Liberal senator Claire Chandler of being patronising after she pointed out Labor’s capital gains tax changes aren’t a complete reversion to what existed before September 1999 until Liberal prime minister John Howard’s changes.

“I don’t have all the transcripts that you’re reading from but the Government has been very clear, when making statements like that, that it’s relating to how you treat gains as opposed to the changes that were brought in by prime minister Howard and reverting back to the system that existed before that, adjusting for indexation and taxing real gains,” the Finance Minister said.

“It’s a bit early to start the patronising - we’ve got a long day ahead of us. The Prime Minister has been clear about the changes that we have brought in.”

Ms Wilkinson also conceded Labor’s negative gearing and capital gains tax changes would mean 35,000 fewer homes and admitted forecasts of $2 a week more expensive rent - following a correction to senators - ignored the effects of investors selling properties.

“Our best estimate is that rents would be slightly lower - about $2 per week lower as a consequence of just the tax changes,” she said.

“That doesn’t take into account the broader impacts on supply.”

Under a follow-up question from Senator Chandler, Ms Wilkson corrected the record to say she meant rents would be $2 a week higher under Labor’s tax plans.

“Sorry, I did mean to say higher, sorry, senator,” she said.

In another awkward moment, Ms Wilkinson struggled to explain to Liberal housing frontbencher Andrew Bragg if a granny flat would be considered a new build under Labor’s plan to restrict negative gearing to brand new properties, taking 26 seconds to flick through Treasury papers.

“Table two in the explainer, it says that a granny flat built adjacent to an established property that is not eligible for negative gearing is not an eligible new build,” she said.

The Treasury Budget papers admitted weaker house price growth would mean 35,000 fewer homes over the coming decade as a result of Labor’s plan to restrict negative gearing to brand new homes from July 2027, and replace the 50 per cent capital gains tax discount with a minimum 30 per cent tax on inflation-adjusted gains for existing properties.

“Lower house price growth will have a modest impact on housing supply, with the increase in supply over the next decade expected to be only around 35,000 dwellings fewer compared to no tax policy change, equivalent to around a quarter of a per cent of the current dwelling stock,” it said.

The Budget papers also forecast Australia having 75,000 more owner-occupiers in the housing market during that time based on policies to boost supply, which Senator Gallagher argued meant a net increase of 30,000 homes, citing the Treasury documents.

“There would be an increase in net supply which would be available to first homebuyers,” Ms Wilkinson said.

But the Treasury secretary also conceded the Federal Government was too reliant on income tax revenue, noting younger people overwhelmingly relied on wages to save up for a mortgage deposit.

“My understanding is that most young Australians earn most of their income through wages and salaries,” she said.

Personal income tax is expected to make up 51.9 per cent of Federal Government revenue in 2026-27, or $382.4 billion out of the $737.1 billion in tax receipts.

Labor is resisting Opposition Leader Angus Taylor’s plan to index marginal income tax brackets.

The working age population bears the financial brunt of the income tax burden as capital gains tax concessions for property investors benefit older Australians.

Ms Wilkinson described this as an intergenerational issue, when questioned by 22-year-old Labor senator Charlotte Walker.

“In relation to intergenerational equity, there are really three sets of issues which are raised,” she said.

“The second issue that’s raised, in terms of a policy challenge, is the pressure within the tax system on personal income tax, personal income taxes going forward in terms of the pressure within the system to use personal income taxes as part of revenue raising in order to fund government Budgets.”