Former PM hits out at ‘greed’ from capital gains tax critics as support for Jim Chalmers grows
Former premier Paul Keating has come to the defense of Finance Minister Jim Chalmers, accusing investors of sheer greed over his capital gains tax overhaul after NSW Premier Chris Minns warned his federal allies they were failing to deliver bigger income tax cuts.
Minns’ call to allow workers to keep more of what they earn comes after Chalmers refused to approve changes to the CGT allowance following questions about whether they would restrict investment and harm the economy.
The NSW premier, who last week clashed with Premier Anthony Albanese over funding for Victorian Premier Jacinta Allan’s contentious Suburban Rail Loop, said CGT reforms were “not my changes”.
Younger shareholders and experienced venture capitalists have rebelled against Labour’s “intergenerational equity” budget, which Chalmers and Albanese say is designed to boost investment and productivity.
Keating, Chalmers’ mentor who first created the CGT, tried to change the debate by saying investors wanted to exempt start-up capital and shares “as if the commenters hadn’t already feasted on that”.
“They want to preserve capital preference over wage and salary income,” he said in a written statement.
Keating argued that John Howard and Peter Costello were doing their “second-hand car sales and dodgy accounting friends” a favor by creating a flat CGT discount of 50 per cent; The former prime minister argued this had caused Australian house prices to become nearly the most expensive in the world. UNSW economist Richard Holden questioned the link between the CGT change and the price rise.
“A society that cannot house its children is a society in decline; that is what Jim Chalmers and his prime minister are trying to arrest,” Keating said.
“But when Jim Chalmers articulates a policy principle to restore fairness to the taxation of capital profits on the basis of equality with the taxation of income, we hear murmurs of continuation of preference.”
In response to investors’ claims that money would move to places without capital gains tax, such as Singapore and New Zealand, Keating said: “Big idea punters will not be affected by some marginal changes in the tax rate.
“The flow of entrepreneurial blood to the brain is always dominant.”
Keating’s defense of Chalmers came a week after the treasurer, who wrote his PhD on Keating’s pro-market reforms, reverted the CGT cut to a model similar to the one Keating had created before Howard’s changes.
Critics say it is right to scrap negative gearing and CGT relief on homes. But they worry that as the changes spread to all assets, young entrepreneurs who take big risks will lose and older people who invest in blue-chip stocks will gain.
Another talking point in last week’s federal budget, billed as Labour’s most ambitious budget, was the government’s decision to propose a permanent $250 tax cut known as the Working Australia Tax Offset. Opposition Leader Angus Taylor followed up by promising a structural change to income tax that would index thresholds to inflation and permanently eliminate bracket shifting. Chalmers rejected indexation and suggested Labor would continue to use balancing to provide relief.
Minns weighed in on the indexing campaign proposed by Taylor. Keating and his union ally, Labor veteran Bill Kelty, had previously called for the top marginal rate of 47 per cent to be reduced because, as Keating said, the high rate internationally was “confiscatory”. So is independent MP Allegra Harcama.
Minns told reporters: “The top marginal rate is 47 per cent. As I said in parliament last week, you work for yourself on Monday, Tuesday and half Wednesday, and then work for the government on Wednesday, Thursday and Friday, it’s a heavy burden.”
“I know budgets are under pressure, but overall we need to make sure we act urgently when it comes to personal income taxes, whether now or in the future.”
Taylor weighed in on Minns’ comments about the tax contest, which has created an ideological tussle that will dominate political debate ahead of the next election.
“Even state premiers can see what Anthony Albanese will not accept,” he said.
The Victorian labor government has rejected the idea, issuing only a statement: “We are currently assessing the impacts this will have on businesses in Victoria.”
In Melbourne, Chalmers opposed Minns, stating that marginal tax rates did not work in the way Minns suggested.
“One of the problems with our tax system right now is that it’s out of control. It doesn’t reward work enough, so we’re cutting taxes fivefold in three different ways,” he said.
“We’re making some tough decisions to fix this.”
Chalmers has signaled some CGT changes for the start-up sector. These changes are unlikely to satisfy a growing number of critics, including independent MP Allegra Harcama and former Labor adviser Lachlan Harris, who worry that the new inflation-measured discount will chill investment and hurt many business people, not just startup founders.
Keating introduced CGT in 1985 as part of a broad tax package that included major cuts to personal and company taxes as well as the creation of a fringe benefits tax. The Coalition led by John Howard promised to abolish the tax at the 1987 election.
In 1999, the then Liberal treasurer Peter Costello overhauled the CGT, replacing the inflation indexation system with a flat 50 per cent deduction on all nominal capital gains. This was expected to increase investment in the share market, but critics argue it has instead led to a nearly 25-year rise in house prices.
Shadow treasurer Tim Wilson used his National Press Club speech to praise what he called a “truly organic” social media campaign mocking Labour’s CGT changes. He described Albanese as “the guy who doesn’t do any of the work on the group assignment but still wants to get grades”.
“Where we should have been united, we have had the prime minister pick fights around the nation’s kitchen tables, pitting children against their parents, grandchildren against their grandparents,” Wilson said.
“It is such an unambitious budget for our nation that its failure is revealed by its own figures.”
Chalmers criticized Wilson, describing his speech as “the least coherent, least credible shadow treasurer to emerge after a budget that anyone can remember.”
“Tim Wilson’s misinformation and lies did not stand up to 30 minutes of scrutiny,” Chalmers said. “First of all, their policy is towards bigger deficits, more debt and more inflation.”
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Paul Sakkal is the Chief Political Correspondent. He has previously covered Victorian politics and won the Walkley award as well as the 2025 Press Gallery Journalist of the Year award. Contact him securely on Signal @paulsakkal.14.Connect with: X or email.
Shane Wright is senior economic correspondent for The Sydney Morning Herald and The Age.Connect with: X or email.
