Review of CGT and negative gearing a step too far

Treasurer Jim Chalmers should be wary of penalising those who have aspirations to better themselves. Picture: Martin Ollman

Here we go again.

If they hadn’t learnt from the Shorten-Bowen tax agenda, the Albanese-Chalmers review of capital gains tax and negative gearing – on top of the abolition at the top level of the stage 3 tax cuts along with the proposed changes to superannuation – is now broad and deep, and aimed clearly at those with aspirations.

I also fear that the superannuation retirement tax issue it is also somewhat misunderstood.

Super changes

The following in simple terms are being proposed:

● An additional tax of 15 per cent above individual balances of $3m, which is not indexed.

● If you are on a defined benefit, such as a retired judge or public servant, changes are legislated for the calculation of your retirement benefit. It will be 16 times the valuation method under the family law legislation which, for simplicity, lets say is the annual benefit.

● Division 296, or the new tax for balances above $3m, it is assessed on the total balance above the $3m threshold.

It is proposed the Division 296 tax liability will be assessed to the superannuant and not the fund, and will be calculated by the Australian Taxation Office based on available information. Individuals subject to Division 296 tax will be able to choose to pay it using funds outside superannuation or request the funds be released from their superannuation account.

● What is in contention and held up in the Senate, and rightly so, is the taxation of unrealised gains. In other words the deeming of a return on an unrealised asset in a fund with a balance of over $3m and taxed on this deemed rate of return.

This has rightly been held up in the Senate by David Pocock and Jacqui Lambie.

If the ALP’s tax agenda is enacted, it will form one of the largest tax changes since the early days of the Hawke government. While the changes introduced by then treasurer Paul Keating made sense, now I believe several proposals are unfair.

What has been mooted in the papers over the last week though has been an extension on the tax grab by the government.

Capital gains tax

The federal government has announced a plan to review the capital gains tax discount for assets purchased (and subsequently sold).

No more details are available but it is believed it has asked Treasury to review.

Negative gearing

The government has asked Treasury to review the limits on negative gearing in the housing market.

Speculation is around limiting the number of properties a taxpayer will be allowed to claim this benefit, but whether this is grandfathered or not is also unknown or whether it applies to new housing or existing housing.

Personal taxation rates

We have only recently seen the abolition of the stage three tax cuts. Currently, taxpayers incur a 45 per cent taxation rate plus 2 per cent Medicare levy for amounts over $180,000, whereas what was proposed was to lift this top marginal taxation threshold to $200,000.

If the federal government’s tax review becomes an agenda and brought into the next election, it will form one of the largest tax changes since the early days of the Hawke government. While the changes introduced by then treasurer Paul Keating made sense, I believe several proposals are unfair and are simply an attack on aspiration.