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Housing Minister Clare O’Neil has branded backlash to the capital gains tax reforms as “completely out of proportion” with the changes taking effect, while conceding it is in the nation’s best interest for carve-out consultations to wrap up “speedily”.
The CGT changes will scrap the existing 50 per cent discount – introduced in 1999 – in favour of an inflation indexation model that will apply to all asset classes, including investment properties, shares, and businesses.
A 30 per cent minimum tax rate will also apply.
On Sunday, Ms O’Neil told ABC Insiders the reforms aimed to correct a “huge mistake” made by the Howard-Costello government which introduced the existing 50 per cent discount regime almost three decades ago.
“They said at the time that this was about getting more Australians to invest in the share market,” Ms O’Neil said.
“What they actually did, unwittingly, was make residential property the most lucrative, low-risk investment in this country.
“And what happened, investors flooded out of shares and went into property, and that’s brought us to where we are today.”
Labor’s proposed reforms would create a “neutral platform for investors to make good decisions”, Ms O’Neil said.
“A good tax system that’s working well is when investors make the best economic decision for them, and that’s also the best economic decision for the country.
“And that’s what the CGT changes are about, calculating the real gain that people have made, rather than this shorthand.”
The Hotham MP insisted the commentary around CGT had been blown “completely out of proportion” with the reality of the changes.
“We need to keep reminding people, (we still have) a capital gains tax discount. Small businesses’ concessions will all remain, and we’re in that consultation,” she said.
Asked if Labor was looking to settle any potential carve-outs as soon as possible, Ms O’Neil said the government would not be “driven by the politics of the moment”.
But when pressed on a timeline by host David Speers – who pointed out Australia could lose out on venture capital if investing rules remained persistently unclear – she conceded it “was important that this gets resolved speedily”.
Treasurer Jim Chalmers introduced Labor’s tax package – which includes the controversial CGT and negative gearing reforms – as an omnibus Bill to the House of Representatives on Thursday.
Mr Chalmers noted the government’s ongoing consultation with start-ups where “indexation is applied to a low or zero cost base”. He said any subsequent carve-outs finalised in additional legislation, described it as a “standard approach”.
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