Paul Keating urges Labor to stick with capital gains tax overhaul and avoid exemptions that would hurt economy | Paul Keating
Paul Keating has called on Labor to stand firm on controversial changes to capital gains tax and warned that exempting business entities from these changes would further “distort” the economy.
Small businesses and the start-up sector are fighting the Albanian government over plans to shift the 50% capital gains tax cut to an inflation-based model, part of a package of tax reforms announced in this month’s federal budget.
Ahead of Labor presenting the amendment bill in parliament on Thursday, Australia’s 24th prime minister said the conditions in place since 1999 had seriously damaged the productive economy as financial resources were diverted to housing, especially established properties.
“This has had a huge and detrimental impact on investment and with it productivity,” Keating told Guardian Australia on Wednesday.
“The Government has done the right thing on housing but it is imperative that the CGT change does not create new and further distortions in the economy by exempting all other assets, especially commercial ones.
“The change in capital taxation under the new regulations is so marginal that no entrepreneurial venture is likely to be hindered by this change.”
Keating, the architect of major economic reforms of the 1980s and 1990s, said that correcting the balance of taxation between capital and labor “must be and remain the primary goal of policy, of new policy.”
Chancellor of the Exchequer Jim Chalmers has warned that the changes introduced by the Howard government overcompensate for established residential investment and undercompensate for other types of investment.
“We didn’t think it made much sense to replace a major distortion with another type of distortion,” he said.
But investors and entrepreneurs are strongly opposed to the government’s plans, warning that they would badly discourage investment and risk-taking in the economy.
The legislation will include CGT changes, changes to negative gearing rules, a $1,000 standard tax credit and a new $250 annual tax offset for workers.
Labor wants the legislation to be passed before parliament’s winter recess in July, but the Coalition has pushed back the timetable, insisting the changes won’t start until July 2027 and need not be rushed.
A possible deal between the Greens and the Coalition could see the Senate launch investigations into tax changes and spending cuts to the National Disability Insurance Scheme.
Shadow treasurer Tim Wilson said the Coalition planned to use “maximum leverage” to review the plans.
“If the government wants to talk about NDIS changes then they need to let the Australian public have their say on tax changes that they are not passing on to the Australian community which is currently hitting this country’s small businesses.”
The CGT changes (replacing the 50% tax relief on profits with “cost-based indexation”, meaning post-inflation profits tax, and a minimum 30% tax rate) have sparked a social media campaign mocking Prime Minister Anthony Albanese in AI-generated memes.
Small businesses with revenues under $2 million will be exempt from the plans, and Albanese indicated this week that further regulations were possible.
Investors and business groups are seeking further consultation, with Business Council chief executive Bran Black warning against rushing the process.
Guardian Australia has been told some Labor MPs are angry that the budget message moves away from intergenerational fairness in the housing market amid opposition.
