It’s A Question Of Trust, Dr Chalmers!

The recent proposed changes to capital gains tax, negative gearing and trusts in the Federal Budget is going to hit a lot of people very hard!

I know this – because apart from what I’ve learned on social media – the mainstream press has been telling me how hard it’s going to hit hard-working people who’ve spent many, many hours working out ways to minimise their tax. Take trusts for example: There have been several articles explaining how some families have set up their finances so that instead of paying for Portia and Llewelyn’s school fees with after tax income, the parents have enabled their offspring to pay it out their own income from the family trust. Under the new arrangements, Portia and Llewelyn may have to pay an amount of tax on this… The articles haven’t been clear on exactly how much tax they’ll be paying but, as all tax is theft, any amount is too much for young people starting out in life just trying to get ahead and pay their own way, rather than relying on handouts from mum and dad.

And it’s not just trusts. Some small businesses will have to pay capital gains on the business when they sell. Someone tried to point out that this won’t be very many because a) most small businesses fail and b) small businesses with a turnover of less than $2 million or net assets less than $6 million are exempt. While that seems a lot, you clearly haven’t bought a cup of coffee in Melbourne lately!

No, if I were to, for example, buy a bookstore from a local merchant for $20,000, then – after years of hard work I were to turn it into a multibillion dollar chain of stores and then sell it for a billion dollars, then I’d have to pay nearly half that in tax!

And yes, I would be compensated for inflation so that the $20,000 might be $30,000 or so, but that would still mean that I’d only be left with a paltry $600,000,000 after tax, which is barely enough to buy a decent yacht let alone a private jet. It’s enough to stop me doing it and being content to stick with my job stacking the shelves at Aldi…

No, this will be a dampener on small business and all the poor young people saving for a house deposit by starting their own small business or investing in the share market or buying crypto currencies. How are they supposed to save for a deposit by simply putting money in the bank? Far better that they take risks and hope for a big pay-off which the proposed changes will discourage them from doing, so where are the all the failed small businesses going to come from in the future?

Not only that, but if the investors desert the housing market, young people may be put off from buying, for fear that their home will just be a place to live and not something that ends up worth more than their superannuation within a few years. Why, last weekend there were reports of how clearance rates were down and this suggested that prices for houses may be falling. Why would a young person save for a house if they don’t make an enormous profit after living in it for thirty years?

And the future where you can only negative gear on new housing? Well, that may also lead to an increase in supply and – under Angus Taylor’s proposal – this would lead to more migrants and this will upset Pauline Hanson and her supporters, leading to more division.

Whatever way you look at it, this Budget is going to be very unpopular will everyone, apart from a few people who don’t have the initiative to risk a lot of money and make capital gains. Just because those people may be a significant number of voters doesn’t mean that they’re right to rely on their wages and salaries and government handouts. This country was built on people prepared to take a risk… and convicts, who surely also took a risk, but they got caught.