Seize lesser of tax evils, Liberals urged by ex-RBA board members

Liberal Party supporters and former Reserve Bank board members have implored the Coalition to negotiate with Labor on an unrealised capital gains tax.

Former Reserve Bank board members Donald McGauchie, left, and Roger Corbett.

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Former Reserve Bank board members Donald McGauchie and Roger Corbett and major ­Liberal Party donors have ­implored the Coalition to stay at the negotiating table with Labor on its superannuation tax proposal, ­declaring a deal would be a lesser evil than allowing the introduction of an unrealised gains tax.

Jim Chalmers slammed the door shut on co-operation with the Coalition, but Anthony Albanese has left it open to possible changes to Labor’s proposal to slug Australians with $3m or more in their super accounts with a tax on unrealised capital gains without indexation.

The Coalition is divided about whether it should take the gamble of negotiating on a deal to change the tax rates on superannuants within its core constituency in a bid to scuttle the proposed unrealised gains tax component and ensure indexation.

Mr McGauchie, who was ­appointed to top advisory positions under John Howard and is now chairman of Australian ­Agricultural Company, said he thought the Coalition should try negotiating a deal with Labor to change the tax rates but scrap unrealised capital gains tax and ensure indexation.

“I think it’s the most outrageous thing I’ve seen in a very long time,” Mr McGauchie said.

“Everyone knows how bad this is. It’s not for me to tell either side of politics what to do, but I think (the Coalition and Labor) should be dealing with unrealised gains and indexation.

“I don’t think it would be a big issue if (the tax rate) went up a bit on accounts of $3m, but bringing in unrealised capital gains tax is fundamentally wrong.”

Mr McGauchie noted Liberal Tim Wilson won an extremely tight race in the seat of Goldstein by campaigning against unrealised capital gains tax, saying once people understood it was a tax on money people didn’t have, it became a powerful argument.

“If introduced it will grow like a cancer,” he said.

Mr Corbett, a former Woolworths chief executive and Liberal Party member, said he thought it worth the Coalition staying at the table on tax.

“If I was in opposition, I would be attempting to ­renegotiate the whole tax regime,” Mr Corbett said.

“I would open up the whole tax-reform question. I would ­certainly be against unrealised capital gains tax – that would be the starting point.

“Both parties working together is a sensible thing to do and I think the electorate expect that, but taxing unrealised gains is ­unjust and destroys one of ­Australia’s advantages and that is Paul Keating’s superannuation system.”

Mr Corbett said he knew of people “inside Labor” who were unhappy with taxing unrealised gains and said that while the ALP had a big majority “there might be some room” inside the party to negotiate with the ­Coalition.

Mr Corbett and Mr McGauchie, who own and operate farms, said the tax would be “particularly difficult” for farmers.

The Australian revealed this week that key members of Mr ­Albanese’s economic team ­considered exempting family farms and properties owned by small business from the ­controversial unrealised capital gains tax.

The Greens have pushed for the threshold to be lowered to $2m and the figure to be indexed, which very conservative modelling by the Financial Services Council showed this week would hit more than 200,000 people currently in the workforce by the time of retirement.

Treasury estimates 1.2 million people would be liable for the tax within 30 years. Other estimates have the number of people affected at 1.8 million over their working lives.

On Thursday, Mr Albanese left the door open to the Coalition proposing changes to the super tax, saying he would allow the Greens and the Liberals to make suggestions.

“The Greens usually don’t have good points, and I will allow them to put forward whatever they want to do, as the Liberal Party will, as will other senators, no doubt,” Mr Albanese said.

“We have put forward our position. That was before the senate for some time. We’ll wait and see,” he said.

Malcolm Kennedy, chairman of geospatial and medical importer CR Kennedy & Company and a major Liberal donor, said the Coalition should think again about the power of compromise.

“I personally think it is a big mistake for the Liberals to back away from their compromise offer, as this is the lesser of two evils,” Mr Kennedy said.

“The timing of this new tax could not be worse with half the county in drought and the other half in flood.

“In my view the family farm must definitely be exempt from this hideous tax. It’s not possible for farmers to sell their assets to pay the tax without massively disrupting their business.”

Superannuation expert Meg Heffron said the government could give ground and turn the proposal into something that produced better outcomes for all. “It’s not too late for the government to do the hard yards on finding a better solution here,” she said.

“And perhaps it even provides a good starting point for broader discussion around super and tax reform. They’ve kicked the hornet’s nest already, why not do something meaningful?”

Opposition frontbencher Dan Tehan said on Friday that including farms in unrealised capital gains taxation showed Labor had “no idea about what is happening in the farming community and how farmers operate their businesses”.

“What you’ll be forcing them to do is to sell their land to be able to pay the unrealised gain,’’ he said. “And this is at a time when they’re either dealing with drought, they’re either dealing with floods or they’re dealing with tax increases.”