Australia’s richest woman has given the thumbs down to Anthony Albanese’s capital gains tax, warning it will force business investment offshore.
Gina Rinehart remains Australia’s richest person, with a personal net worth estimated of over $41 billion AUD.
Now she’s warning the nation that the CGT tax changes are ill-considered and bad for the Australian economy.
“If you reduce the incentive and ability for people to invest, you reduce future discoveries, future mines, future jobs, future revenue and future growth for Australia at a time when our country sure needs it,’’ she told The Australian.
“Additionally, what is also being missed in the CGT increase is that people are investing money they have already paid tax on through PAYG and other taxes, and yet any profits they make on that reinvestment is now going to be subject to even higher taxes.
“New Zealand points out that it has no capital gains tax and suggests publicly (that) struggling Aussies invest in New Zealand instead. Investment is internationally mobile.”
It comes as tech entrepreneurs’ AI-generated photos mocking Anthony Albanese as their new founder have hit their intended target, with Labor MPs leading the charge to “tweak” the capital gains tax changes.
As MPs return to Canberra this week, the Albanese Government is preparing to introduce the first tranche of legislation over contentious reforms to capital gains tax and negative gearing.
But that doesn’t mean the reforms are signed, sealed and delivered.
Instead, the ALP caucus committee will hold talks on Monday with MPs pushing for a more generous regime to help start-ups and entrepreneurs.
The CGT changes replace the 50 per cent tax discount on profits with an indexation model, which taxes profits after inflation, and a minimum 30 per cent tax rate.
Entrepreneurs have raised concerns that the changes disproportionately hurt start-ups because they typically begin with a near-zero cost base, leaving founders facing an effective tax rate of up to 47 per cent on the profit from a successful business sale.
What Labor MPs want
Several MPs who spoke to news.com.au want carve outs to go beyond tech start ups.
“I see the same argument for a tech start-up as for a non-tech start-up,’’ a Labor MP said.
“I think there will be a carve-out, and it will be for start-ups.”
One option could be to increase the threshold for small businesses captured by carveouts with a turnover of under $2 million.
“Those numbers haven’t changed in a while,’’ a Labor MP said.
But it’s not clear that the Treasurer Jim Chalmers is on board with big changes.
Senior government sources admit the situation is fluid and the government hasn’t landed on a final position.
Current exemptions
Eligible small businesses can already access a range of concessions based on aggregated turnover.
These exemptions apply to sole traders, partnerships, companies and trusts.
The 4 existing small business CGT concessions include the small business 15-year exemption, the small business 50 per cent active asset reduction, the small business retirement exemption and the small business rollover.
Speaking on Sky News cabinet secretary Dr Andrew Charlton said the CGT changes grapple with “a longstanding challenge we’ve had in CGT, which is that the old CGT regimen of a 50 per cent discount provided a very blunt instrument, which massively overcompensated some assets and taxed way too harshly other assets.”
“It’s a very normal process in any budget that after you implement a budget, particularly a budget that has big reforms like this, that you go and consult with industry on the implementation of those reforms,’’ he said.
“And the Government has said that we will be doing that, particularly in relation to start-ups, because of the issue that Jim Chalmers identified in the budget and has been consulting on.”
Mr Charlton said despite the backlash, a number of small businesses would be better off under the changes.
“It will depend on the circumstances, but I reckon there’ll be a lot of people who will be better off, particularly people who we want to encourage to invest in long-term productive assets. That is a good thing for the economy and it is a good thing for Australia,’’ he said.
“This is about addressing the biggest challenges in our economy right now. You are right that one of those challenges is housing, and this budget addresses housing by limiting negative gearing to new builds, so we’ve got more housing for young Australians, by fixing the capital gains tax system so we’re not too generous on detached houses as we have been in the past, but punitive on other assets.”
Younger workers big winners in budget
Meanwhile, the government is selling the positives in the budget for younger voters with a new Treasury analysis claiming that young Australians aged under 35 will be the biggest beneficiaries of Labor’s tax changes.
Young people overwhelmingly earn income from working and that means young people will be the biggest beneficiaries of the new tax cut known as the WATO.
Two-thirds of the recipients of WATO will be millennials and Gen Z in 2027-28.
“This is a Budget that’s all about helping young people and workers to get into the housing market and get ahead,’’ the Treasurer told news.com.au.
“We’re backing young people in this budget with tax cuts, a fairer tax system and a leg up into the housing market.
“The vast majority of those who benefit from our tax cuts are young people and they’re the big beneficiaries of our changes to negative gearing and capital gains as well.
“Young people don’t get the benefits of the current CGT system, but they do suffer the consequences because it locks them out of the housing market.
“We’re recognising and respecting the investment and the contribution older Australians have made and continue to make to our country and our economy and we’re expanding those opportunities to give young people a leg up as well.”
