ALP’s tax plan hurts workers, says Frydenberg

Josh Frydenberg says Labor’s proposed capital gains changes will adversely affect workers earning $80,000 or less.

Treasurer Josh Frydenberg at Parliament House in Canberra. Picture: Kym Smith

More than 60 per cent of taxpayers who made capital gains had taxable incomes of $80,000 or less, previously unpublished tax office data has revealed, as Josh Frydenberg stepped up his campaign to highlight the extent of those affected by Labor’s bevy of proposed tax increases.

The Treasurer, using latest Australian Taxation Office data, said these taxpayers, including 194,000 with taxable incomes in the middle income tax bracket from $37,000 to $80,000, would have been adversely affected by Labor’s proposal to reduce the capital gains tax discount from 50 per cent to 25 per cent.

“Bill Shorten is proposing a tax on entrepreneurship, investment and wealth creation,” Mr Frydenberg said. “It’s an inconvenient truth for Labor that its policy will hit more individuals on low and middle incomes than those on higher incomes.”

Opposition Treasury spokesman Chris Bowen shot back, saying the Labor tax proposal overwhelmingly fell on better off taxpayers and would help fund “schools and hospitals”.

“Josh Frydenberg today needs to confirm that 70 per cent of the benefit of the capital gains tax discount flows to the 10 per cent of income earners,” Mr Bowen said.

“The fact is that there is no tax concession or discount that is so heavily skewed towards high income earners — the capital gains tax discount was created 20 years ago in a high inflation environment and it’s time it was reformed,” he said.

 

Tax is set to be the main battleground in the upcoming federal election, following a series of tax proposals by Labor — including curbing negative gearing and lifting the top marginal tax rate to 49 per cent — that would lift tax on high-income earners while providing a $928 tax cut for taxpayers earning up to $125,000.

Analysis by The Australian of tax office data shows just over 194,000 tax filers in the middle income tax bracket (or 3.9 per cent of the total in that bracket) made capital gains in 2016, compared with 70,635 with taxable incomes above $180,000 (or 17 per cent of those in the top tax ­bracket).

The same statistics reveal the average value of capital gains for these middle income taxpayers, of those who made a capital gain, was $9176, compared with $164,710 for those who made a gain in the top income tax bracket.

“In Labor’s world, preparing for international economic headwinds involves $200 billion of new taxes, hitting retirees, the housing market, business and income earners,” Mr Frydenberg said.

The Coalition’s rival plans, abolishing the second top tax bracket and lifting the top threshold to $180,000 by 2024, would leave workers earning more than around $100,000 better off, compared with Labor’s plans.

The Treasurer launched a pre-election assault on Labor’s plan to halve the capital gains tax discount last week, warning that hundreds of thousands of Australians would be taxed at the “highest rates” in the Western world.

In a move that shifted focus from the Opposition Leader’s proposal to limit negative gearing to new dwellings, Mr Frydenberg cited government analysis that showed Australians would be taxed up to 36.75 per cent on their capital gains under Labor’s policy, up from 23.5 per cent now.

By comparison, US taxpayers face a 23.8 per cent tax on capital gains, the British pay 28 per cent on residential property and 20 per cent on other assets, while Can­adians are taxed at 16.5 per cent, according to the modelling.