Anthony Albanese has faced criticism from taxpayers for what they describe as a βdisjointedβ explanation concerning the governmentβs revisions to the capital gains tax (CGT).
Recently, the government revealed plans to eliminate the long-standing 50 percent CGT discount starting July 1, 2027. In its place, an inflation-adjusted system will be introduced for assets retained for more than a year.
The administration contends that modifying the CGT is a move towards creating a fairer housing market landscape.
However, numerous investors are puzzled over why the CGT discount removal extends beyond residential property to encompass other assets, including stocks.
The Prime Minister was gently questioned about the issue by financial influencer Natasha βTash Investsβ Etschmann, who said she was given three minutes to quiz the PM about the Budget in Canberra.Β Β
βWhy were the changes to the capital gains tax applied across all asset classes rather than solely targeting residential properties?β one citizen inquired.
βThereβs a sentiment of unfairness since the changes also affect shares and businesses,β she added.
Albanese responded by saying his government wanted to make sure that investment was driven towards more productive sides of the economy.Β βLet me be clear,β he said.Β
Anthony Albanese was slammed for his answer over changes to capital gains tax
Natasha Etschmann asked Albanese why the capital gains tax changes applied to all assets
βThe way that the system had worked had distorted the market. It had directed the investment much more towards property which is one of the things that contributed to the substantial distortion of the market towards housing rather than investment in equities or some other form,β Albanese said.
Etschmann then asked: βYeah, but it still feels like by changing CGT across all of assets still kind of incentivises people to invest in property.β
Albanese responded by giving her a history lesson.Β
βThere wasnβt a tax on capital before 1985. It was then changed by John Howard to have this 50 per cent discount which shouldnβt be the purpose.
βThe purpose should be that greater equity between investing or receiving income from assets the way that itβs treated and assets from work, so itβs getting that rebalance there so that having capital gains tax based upon inflation means youβre actually taxed based upon the real gain.
βIf you get a real gain in your income, you get taxed on it.β
Taxpayers werenβt buying Albaneseβs explanation, with one telling Ms Etschmann βwell done for tryingβ.
Another viewer added: βI thought it was a meme using AI, sounded like he had a stroke.βΒ
Albanese and Treasurer Jim Chalmers have been grilled since last weekβs Federal Budget
A third said: βStill waiting for the answer to your question.βΒ
βThis is a politicianβs answer in its purest form,β said scientist Dr Matt Agnew.Β
ββLetβs be clearββ¦ *proceeds to be unclear*β, another viewer said.Β Β
βWants to βdrive investment towards more productive sides of the economyβ, yet punishes business and shareholders the same as property,β quipped another.
How the old system worked vs. the new system
Since 1999, Australians who sold assets such as shares and investment properties after owning them for more than 12 months have only had to pay tax on 50 per cent of the profit they made.
That meant someone on the top marginal tax rate of 47 per cent effectively paid a maximum capital gains tax rate of 23.5 per cent.
But under Laborβs new system, that automatic 50 per cent discount will disappear.
Instead, the government will adjust the original purchase price of an investment for inflation before working out the tax bill.
For example, if someone bought shares for $100,000 and later sold them for $200,000, they currently pay tax on half of the $100,000 profit, or $50,000.
But under the new rules, if inflation meant that original $100,000 investment would be worth $130,000 in todayβs dollars, they would pay tax on the βrealβ $70,000 gain above inflation.
Treasury examples contained in Budget documents show someone earning a typical five per cent annual return on a $500,000 asset over 10 years would pay about $8,075 more tax under the new system compared to the current 50 per cent discount.
But investors earning very strong returns would be hit much harder.
Treasury said someone earning a 7.5 per cent annual return on the same investment over 10 years would pay an extra $58,851 in tax.
By contrast, investors whose returns barely outpace inflation could end up paying less tax than they do now because the inflation adjustment wipes out much of the taxable gain.
One Treasury example showed an investor paying nearly $25,000 less tax under the new rules because their investment only matched inflation.
