Investor tax cut call as opponents fight Labor plan
Investor incentives should be increased, not cut, a senior Liberal says as Labor moves to pass a once-in-a-generation tax overhaul through parliament.
Business leaders have warned that measures laid out in the federal budget in early May would lead to talent and funds moving abroad as the current 50 per cent capital gains deduction is scrapped in favor of a minimum 30 per cent tax rate.
The Albanian government is expected to submit legislation to the federal parliament within two weeks that would end discounts and negative effects for investors purchasing existing properties.
Opposition housing spokesman Andrew Bragg said he would increase the rebate rather than remove it to ensure money flows to where it is needed.
“We should try to reduce taxes,” he told Sky News on Sunday.
“There are a lot of ways you can play (capital gains tax) to encourage more investment.”
Asked how the coalition would fund a previously promised plan to end so-called step-shifting for income taxes, costing at least $22 billion, Senator Bragg agreed that significant spending cuts were needed.
He said it was “part of the weakness” of political leaders to be too afraid to say what to cut but refused to identify areas to target for savings.
Capital gains tax is payable when assets such as shares or property are sold for an increase in value.
The proposed regime would adjust inflation returns before the tax is imposed; This means the burden on low-growth assets could be less than under the current discount-based regime introduced by the Howard government in 1999.
But Labour’s plan has been criticized, particularly by start-up and small business supporters, for discouraging people from setting up and investing in young companies with low start-up costs.
UNSW chief social economist Richard Holden said the plans would create Australia’s first “productivity tax” under which productive firms would pay more than their less productive counterparts.
“Two identical businesses providing exactly the same service, one highly efficient and the other inefficient, will now face very different effective capital gains tax rates,” he said in a post-budget analysis.
“Young people will pay the biggest price for this profound policy mistake, because they will miss out on the job growth and prosperity created by productive businesses.”
Labor cabinet secretary Andrew Charlton argued the tax changes were necessary to prevent investment in existing homes driving up prices and depriving other parts of the economy of needed finance.
He also disputed suggestions that he personally benefited from the old tax regime by selling his consulting business for tens of millions of dollars.
“I would say it’s a fairer system in terms of the assets I have,” he said.
“I would lose some, I would win some, but overall it is a fairer system.”
Asked whether the changes would make the country a less attractive place to invest, Mr Charlton said comparing Australia’s tax rate on nominal earnings in another country was not a like-for-like comparison.
“In many cases, our regime will be more generous to assets that have experienced a lot of inflation over a long period of time and cannot be compensated for in other countries’ regimes,” he said.
Independent senator David Pocock has called for a parliamentary inquiry into the proposed tax change to avoid what he says is a worrying trend of measures being pushed through parliament without sufficient public consultation to set policies correctly.
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