I can’t help but wonder how the whole Capital Gains Tax thing will work out electorally. It seems to be unpopular but once people start listening to the voices against it, I suspect it may end up being a positive for the government…
As people start to listen to the push that suggests the changes are going to stifle all innovation and discourage people from mortgaging their home in order to start some business and nobody will be interested in making money because the government will be taking it away from the people who made this country great, in order to hand to the lazy slobs who just work for a living and rely on a pay cheque… I mean, will that appeal to you if you’re one of those lazy slobs who works for a living
As I keep pointing out, most of the rhetoric seems to assert that the government will now take 47% of any capital gain in taxes. The trouble with this percentage is that it assumes that the capital gain puts one into the top income bracket AND that discount for the rate of inflation was fairly minimal. An asset held for several decades might, in fact, have a greater discount than the fifty percent.
However, I have seen several people who are upset that future gains may jeopardise their chances of making The Rich List. More than one person has had a version of this:
“I turned a few thousand into $190,000,000 thanks to hard work but under the new arrangements, I wouldn’t have bothered because after tax I’d have only been left with a paltry $100,700,000…”
Yes, it’s not really the sort of thing that most of us can relate to. Sure, I’d be upset if my shares in that mining company that skyrocketed overnight and, once I sold them the government taxed me at 47% and I ended up with a mere three or four million dollars… Oh wait, no I wouldn’t be upset, I’d be outraged and I’d be saying why did I even bother to invest this money when I only end up wealthier than I ever dreamt I’d be. It would leave a nasty taste in my mouth… although that could be from the bottle of Grange that I’d left sitting in the sun after I’d opened it and forgotten that it was the maid’s day off!
But, you know, I think I’d probably still think it was worth the investment when I decided that I really could afford business class on my next flight… which would be further away than the one I’m currently planning.
The campaign against the changes doesn’t just talk about how it would have stifled all those people who went from rags to riches. A significant part is devoted to how the CGT changes will stop all those young entrepreneurs who’ve started their own business or invested in shares in the hope of scraping together a housing deposit. Never mind that the changes are grandfathered or that – according to John Hewson in “The Saturday Paper – only 1.3% of 25-29 were doing anything like that.
I guess though this quote from an article on the changes pretty much sums up the confusion:
“He said the $20,000 instant asset write‑off was welcome, allowing small businesses to deduct equipment costs sooner. But Labor’s CGT changes, he said, risked making it harder for young business owners to build wealth beyond day‑to‑day income.”
Now, leaving aside the fact that he was working as a plumber and therefore the idea that he was going to establish a business that would be sell for more than the $6 million threshold seems optimistic to me, but it does raise the interesting question of why someone should get a tax concession if they’re “building wealth beyond day-to-day income”. I mean, most wage-earners don’t have much opportunity to build wealth beyond day-to-day income and, where they do in the form of interest, they have it added to their taxable income with no fifty percent discount.
Nobody seems to addressing the idea that capital gains are somehow more worthy of less tax than income derived labor. Sure, some are suggesting that these capital gains are the result of sacrifice and hard work but they don’t explain why this sort of hard work deserves kinder tax treatment than someone picking fruit for a living. It seems that capital gains is never the result of passive investment in speculative ventures.
Or as Dave Sharma put it:
“Under Labor’s new tax: — You can walk into a casino, come out $1000 ahead, and pay $0 tax — but if you make $1000 on shares/ETFs, you will pay $300-470 in tax — if you build & sell a business, the ATO now takes 30-47% of your gain. Gambling is tax-free. Investing is punished.”
Leaving aside that one could infer that Dave wants a tax on casino winnings and leaving aside that he ignores the discount for inflation, I’m not sure that he understands that you do actually pay tax on gambling. It’s just that it’s charged when the bet is placed and it’s there whether you win or lose, so you don’t notice it. And didn’t I read a lot of stuff about people “taking a risk” when they ignore the failure rate on new businesses, put their savings on the line and start a business.
Gee, if that’s not gambling, what is?
“…but once people start listening to the voices against it…”
Labor’s reforms may be scuttled by those who rely on “Sky News”, Channel 9 and Murdochracy’s current campaign of mal-information.
@ Rossleigh: Thank you for your clear description of the changes to CGT. As I understand the matter, a wage earner is expected to lose PAYG taxation as an ”interest free loan” to the government that will use those funds run the country, like paying out rebates, concessions and other tax deductions to foreign owned multinational corporations (FOMC) which use foreign sourced investment capital from their subsidiary finance corporations that charges multiples of Australian bank loan rates just so they the FOMC may write off all income against the Australian taxation laws that permit all business expenses to be deducted from profit before paying any taxation.
Naturally that means the Australian ”workers” get little/no benefit from the foreign investment because the profits have all been absorbed by the expense off-sets.
Uhm ….. so why are foreign owned multinational corporations excused any financial contribution to the common good simply because they choose to borrow funding at ridiculously high rates from themselves so that Australian PAYG workers can pay for the poor financial decision making of the FOMC executives??
Then there is the LIARBRAL$ approach to taxation – namely that being LIRABRAL$ they should not be required to pay tax because that is a Labor thing of the PAYG ”workers” ….. and everybody knows that LIARBRAL$ would not dirty their shirt cuffs by actually doing any useful ”work”!!
Why just look at the recent Melbourne LIARBRAL$ Conference that reinstated Tony RAbbott as ”President”, an unusually democratically position for a Pommie monarchy lover who knighted a Duke. Still when you see Australia as having a future in the 19th century among the Light Brigade and Manchester slums then it is possibly an excellent idea to refrain from looking to the future for political progress.
Such a wonderful team of luminaries surround ”Our Tony”, the suppository of all political wisdom, the onion eating, budgie smuggling caricature of a ten pound Pom who should have gone back on the same boat because ”boat people” are a major threat to security of the Anglo-Celtic invaders.
His protegee Little Anus Faylure, the $80 MILLION EMPTY GLASS OF MDB WATER entrepreneur and grassland destroyer, a silver spoon alumnus of a heavily state subsidised private school who represents the ”best possible” politician to lead the LIARBRAL$ into obscurity, if not irrelevance.
Naturally the Big Swinging Dicks Misogynist Club approved Just Humus as the loyal Deputy ”leader” because they felt that her unique grasp on the vacuity of LIARBRAL$ ”thinking” would not distract from party room discussions of pecuniary interests and exploitation of the Parliamentary Allowances Scheme.
Yep!! The future is in good hands ….. the PHONeys are coming, the COALition is deep in 19th century history and Australia has a LABOR government of adults reforming the mess concocted during the nine (9) too long years of RAbbott, Turdball and Scummo.
One cannot decide whether politicans inc retired and media are being specious or illiterate when presenting finance, taxes and thresholds?
Saw a newspaper editor do a Minns on tax rates and thresholds…….wtf?
Symptom of how dumbed down Australian elites have become lacking key financial literacy and unable to formulate/ask relevant questions?
Tim Wilson keeps claiming it is “Labor’s toxic taxes”. But it was Howard’s setting up the CGT and negative gearing in 1999 that allowed them to become toxic tax rorts.
Perhaps we should call Tim Wilson ‘Toxic Tim’.
The only people complaining about the changes are those who don’t pay their share of tax !!!
Wage earners have no choice in how much they pay – it goes before they even have it in the hands, then wait a year to maybe claim back a few dollars in a refund. Business owners get to keep ALL theirs until they do a tax return in which they claim massive deductions to minimise the amount they then remit to the Tax Office
It’s going to take time to claw back all the rorts initiated by the Coalition, and they’ll scream and cry every step of the way