Why investors should prepare for major tax changes

Taxes are back in the spotlight, and the recent buzz around potential policy changes is creating ripples of concern among investors, business owners and everyday Australians.

We’ve all seen headlines hinting at changes to negative gearing and adjustments to capital gains tax rules, but these are just the tip of the iceberg. While the prime minister may be quick to reassure us there’s “nothing to see here”, we know governments have a habit of making changes when we least expect them.

As seen in other countries, tax changes can be major and come into effect quickly, catching unprepared investors unawares.Credit: Simon Letch

Last month, the Australian Taxation Office gave a clear message: they’re taking compliance seriously. They sent letters to major insurance brokers requesting details of customers with high-value assets – think fine art, marine vessels, thoroughbred horses, luxury vehicles, motorhomes and even aircraft. If you own any of these, the ATO is keen to know.

And it’s not just happening here – Canada’s recent tax changes offer some clues about directions other countries may take.

From June 25, Canada increased its effective capital gains tax rate by reducing the discount from 50 per cent to 33.3 per cent for individuals with capital gains over $250,000 in a single financial year. While gains under this threshold remain taxed at the current rate, once gains exceed that amount, the new rules kick in: no exceptions, no “grandfathering”.

What stands out is how quickly these changes took effect. Canadians had just 30 days to offload assets before the new rules were applied to everything, regardless of when they were purchased. An accountant in Toronto told me those 30 days were the busiest of his career, as clients frantically moved assets.

The broader implications are clear: your assets are under greater scrutiny than ever before.

There’s a lesson here for Australian investors: shares can often be transferred with little hassle, but property transactions have unpredictable timelines and incur stamp duty – something to keep in mind when planning your portfolio.

Tax is also a contentious issue in the lead-up to the US elections. On one side, Donald Trump promises a corporate utopia (or at least lower taxes). On the other, the Democrats are floating a proposal to increase the corporate tax rate from 21 per cent to 28 per cent.

Additionally, they plan to hike the top rate on long-term capital gains to 28 per cent for those earning more than $1 million annually. Wealthy individuals could also see their net investment income tax rate rise from 3.8 per cent to 5 per cent.

The UK is taking a different approach: looking to close tax loopholes and ensure the wealthy pay a fair share. They are talking about potential capital gains tax increases, and targeting private school fees by proposing a 20 per cent VAT.

This move is shaking up many families that are already stretching their budgets to provide their kids with private education. For many, this feels like an extra burden during already challenging times.

Expect more tough measures to be announced in the new UK government’s first budget on October 30. At this month’s Labour Party conference, the unions made no secret of their claims for huge increases as well as wealth taxes on the richest 1 per cent.

Britain’s five-year political terms give Labour Prime Minister Keir Starmer the time to make significant changes. A sweeping majority of 200 seats almost guarantees a win in the next election, allowing Labour up to 10 years to implement its plans. History suggests tough policies often come early in a government’s term to avoid backlash closer to the next election.

The broader implications are clear: your assets are under greater scrutiny than ever before, and as we see governments globally wrestling with tax policies, Australia will not be an exception.

In a world where tax policies can change overnight, proactive planning is your best defence. Whether you’re an investor, a business owner or simply looking to manage your wealth effectively, now is the time to seek professional advice.

Review your investment strategies regularly, stay informed and be prepared to pivot when needed. After all, in the rapidly evolving tax landscape, the ability to anticipate and adapt is the key to thriving, not just surviving.

Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. [e-mail]

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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