PAYWALL:
Commonwealth Bank of Australia chief executive Matt Comyn has suggested the Albanese government’s capital gains tax overhaul should be limited to real estate and not hit productive investments in business.
Comyn, a close business confidant of Treasurer Jim Chalmers, broke his public silence on the government’s contentious tax changes two weeks after the federal budget.
On Tuesday night, Comyn said it was important for intergenerational equity to narrow the budget deficit through spending cuts, such as to the $56 billion National Disability Insurance Scheme, and by broadening the tax base.
A stronger budget position would leave less debt for future generations to inherit, and help fund higher government spending on defence and economic resilience, he said.
It would also ensure there was financial capacity for the government to respond with stimulus to future economic crises, which were becoming more common, he said.
Asked if he supported the government’s move to axe the 50 per cent discount on capital gains and return to the pre-1999 inflation indexation of capital gains for all assets, Comyn drew a distinction between “passive” investment, such as in residential property, and productive investment in businesses.
“There’s a big difference in my mind between sort of passive asset accumulation versus productive capital or risk taking,” Comyn said on the ABC’s 7.30 program.
“If I’m just accumulating an asset and I’m passively holding that versus I’m investing in a startup, a founder, a business, a junior [mining] explorer, I think that’s quite different, and I don’t think we want to change the incentives towards risk and enterprise and innovation.”
Comyn said imposing the proposed inflation indexation model only on residential property would be simpler.
“It’s obviously very clean if it’s only for housing.
“I think when you get, when you get into all asset classes, which is where you’re trading off simplicity, I think we’ve got to be careful.”
Comyn also said he was comfortable with the restrictions on negative gearing even though the government’s move would reduce investor loans the bank can issue.
The Australian Financial Review last week revealed the Albanese government initially intended to confine the capital gains tax changes to housing, but was advised by Treasury to broaden the change to all asset classes as it was under Paul Keating’s pre-1999 CGT regime.
Chalmers has explained the decision to tax all assets consistently, so investment decisions are driven by economic outcomes, not for tax reasons.
But the controversial move has locked the Labor government in a battle with investors in start-ups, tech moguls and small businesses.
The government is considering concessions for start-ups and small business.
Labor minister Andrew Charlton conceded last week the rules “don’t interact well” with small firms with a low starting capital base.
Small businesses with revenue below $2 million or assets below $6 million already receive concessions or exemptions from CGT when their firms are sold, and won’t be impacted by the budget changes.
In the May 12 budget, the government axed negative gearing except for existing landlords and newly built homes and imposed a minimum 30 per cent tax on discretionary trust distributions, and real gains from property, shares, crypto and other assets such as personal investments in businesses.
Commonwealth Bank delivered its third quarter trading update the next morning and some analysts blamed the new tax settings, which are expected to make investing in property less appealing, for a 10 per cent decline in the bank’s share price.
Comyn had previously called for increasing tax on wealth, including reducing the 50 per cent discount on capital gains, in return for cutting income tax and taxing consumption more.
Activist investor John Wylie this month urged the government to narrow the changes to residential housing, or risk chilling business investment in innovation and jobs.
Wylie, founder of Tanarra Capital, said the 50 per cent capital gains discount had been a significant tax incentive for risk-taking entrepreneurs.
“It’s important we have a more nuanced policy between passive investment and lazy house flipping which doesn’t produce new jobs, and investing in real businesses,” Wylie said.
But former Labor prime minister Keating excoriated “howls” from wealthy business people who had “feasted” on lightly taxed capital gains for 25 years and now opposed the return to the inflation indexation of capital gains that he set up as treasurer in 1985.
“They want to split off start-up capital and shares as if the individuals commentating have not made a feast of it already,” Keating said.
“They nominate tech and start-ups. But if a tech start-up fires, like a Canva, the value acceleration and level of wealth makes any discussion of the tax rate absolutely secondary.”
Source: NoLeafClover777
5 Comments
I initially agreed with this, but it comes down to whether or not we want to shift the burden of tax from income earners to capital which I am in favor of
my view is they should consider bigger tax discounts on small business and startup to encourage investment.
they should consider some discount on shares (is there a way for younger investors or smaller portfolios to be given discounts to get them ahead)
and lastly they should absolutely punish flipping houses and multiple investment properties
This should have been the goal from the start if they wanted to avoid as much backlash. Brings down the price of investment properties & helps younger people with housing affordability while not discouraging business investment.
Pretty sure I saw the likes of Ken Henry etc. advising them to do it this way in the first place, so no idea why they went to a ‘blanket’ reduction on everything at once if the goal is to slow house price growth specifically while not affecting entrepreneurialism.
“Give us a different market distortion to allow us to avoid paying our fair share of tax”. Pull the other mate
If they limited it to real estate, it would encourage property investment via trusts and companies.
I think the CGT indexation changes are fair. It puts CGT income on par with salary income. My issue pertains to the minimum 30% on CGT, which flips it as being worse than salary income. It creates perverse incentives of never taking the leap to take risks. It also doesn’t affect the very wealthy much at all because they would already be beyond the 30% threshold.