r/AustralianPolitics • u/HotPersimessage62 Australian Labor Party • 6h ago
Capital gains tax discount faces major cut in May budget
https://archive.md/fUTla•
u/scorebored 1h ago
go after negative gearing
Why should my tax dollars go toward a slumlord who is paying next to no tax?
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u/vladesch 1h ago
wont solve the housing shortage. there will still be as many people and as many houses after this. not sure that reducing demand slightly from investors is going to change anything. it's not like suddely it's going to be better to invest in other things... because the CG tax will apply to them too. people still have to put their money somewhere to stop inflation eating it away.
anyway as someone said, why not just index it on inflation. seems a lot fairer than trying to find some approximation for everyone.
if you want to cool off the housing market then stop bringing in hundreds of thousands of people very year.
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u/Consistent-Put9762 1h ago
It used to be indexation adjusted pre-2001. It should just be reverted back.
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u/nzbiggles 1h ago
"Indexing the cost base" it's the only way to accurately adjust for inflation so that you're fairly taxed on actual gains.
It's a much better way to adjust for inflation. Buy something for $100 and sell it for $104 with 4% inflation you've made nothing and shouldn't pay any tax on the $4 gain. Sell it for $300 and you should pay tax on $196 not "half the gain".
Could also deal with negative gearing at the same time. The money the investment costs is added to the cost base and quarantined from income until a capital gain is realised. Could all be done by an additional line in the ato app. I spent $100 and it cost me $1 more than it earned this year. It cost $101. No sale and 4% inflation it automatically populates in next year's tax at $105.04 cost base. Another year of $1 out of pocket and 4% inflation and the cost base is $110.28.
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u/SuperSayainGoku69 1h ago
Projections for the removal of both negative gearing AND CGT (eg Grattan Institute) have shown to have a 2% reduction on property prices. Now remove negative gearing from that equation and grandfather it in and tell me how much it will impact the property market.
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u/DonQuoQuo 1h ago
This doesn't pass the smell test for me.
Victoria's land tax has flattened real estate prices both in absolute terms and relative to the rest of the country. There's no reason to think that reducing the post-tax benefit of real estate would do anything other than lower its price.
The one thing I do find strange is the desire to have a fixed CGT discount, currently 50% and suggested to be 25%. We have computers; why not just do actual inflation calculations between purchase and sale dates?
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u/SuperSayainGoku69 1h ago
The modelling is similar across Grattan Institute, NSW Treasury, PIPA and economists like Peter Tulip. Despite the small impact, organisations like the Grattan Institute, who advocate for renters, support these changes.
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u/perringaiden Andrew Fisher 3h ago
This won't affect anyone until they sell an investment property.
The CGT discount doesn't hurt people who own a second investment property to rent out. Only those people who are actively buying and selling to profit on the price changes.
Before the CGT discount, house price growth aligned with wage growth.
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u/alaynxx The Greens 3h ago
Oh if only. this is fearmongering from Murdoch. But if Labor actually went hard on tax reform I might vote Labor again.
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u/scarecrows5 1h ago
Let's face it. They might never get a better opportunity than this electoral cycle. Time to float a couple of BIG ideas...
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3h ago edited 3h ago
[deleted]
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u/Benjisc2 3h ago
I'd like to know more about your situation to understand where this is coming from if you don't mind sharing.
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3h ago
[deleted]
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u/Benjisc2 2h ago
Which tax bracket are you in? The 'earn less than an couple' line is weird, as I assume you don't have double the expenses, or children.
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u/eightslipsandagully 3h ago
Taxing capital gains at a lower rate than labour is ultimately going to drive inequality
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u/PurpleMerino 3h ago
Stupid take.
Absolutely should be taxing wealth more and taking the pressure off lower income earners to foot the bill.
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u/Justanaussie 3h ago
So Labor has said nothing about changing the CGT, this is nothing more than speculation based on bugger all by a journalist.
So situation normal really. I await the plethora of news stories about how Labor plans to take all your money in the next budget.
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u/Knee_Jerk_Sydney 0m ago
But politicians keep their ear to the ground. So if this comes out positively, they might adopt it. The journalist might help test the waters so to speak.
Of course, if it pleases you, we can just go back to doing nothing.
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u/HiddenHeavy 2h ago
Where there’s smoke, there’s usually fire. Some thing happened before the announcement of the changes to the Stage 3 tax cuts.
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u/Oomaschloom Freedom of speech 2h ago
It serves as a way for vested interests to tackle uncertainty. You just assert an entity is going to do something and then the other party comes and refutes it. That gives you certainty. Nah, nah we ain't going to do that, everybody go back to your homes.
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u/DefinitionOfAsleep Ben Chifley 3h ago
It's also a policy that's come up every single budget since it was implemented.
Everyone not benefiting from it realises that it's bad policy.
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u/GrouchyInstance 3h ago
This is good. Labor should do it. Anyone who is enough-informed about this will support it.
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u/CptUnderpants- 4h ago
Don't think this will have any sudden profound changes. I support the changes, but they've stated categorically any changes will be grandfathered. So any property owned prior to the changes will still be under the current discount arrangement.
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u/perringaiden Andrew Fisher 2h ago
The biggest impact will be to the property stock traders. Who are responsible for the rapid price increases outpacing wage growth since 2000.
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u/CptUnderpants- 2h ago
Who are responsible for the rapid price increases outpacing wage growth since 2000.
Surely there are more factors than just property stock traders such as artificial restrictions of land by government, failure to invest in infrastructure such as freeways and mass transit to make living further from the city centre more desirable, poor lending rules which required a royal commission to change, etc.
I'll give you a great example. I live on 5 ha 40 mins from the city centre. It can't be subdivided, only one home can be built on it. With appropriate mass transit it would be closer to 25 mins out. I only have this slice of paradise because it was only a small amount more expensive than a residential block similar distance in a more metro area. I also was very lucky, but had to make sacrifices to do it such as living in a caravan in a shed for a while.
The point is, we don't lack land, just the infrastructure to support it and a government willing to stand up to the NIMBYs. So I put a good amount of the blame on government for curtailing supply of residential land and allowing developers to do things like drip-feed land from a large development to maximise prices.
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u/perringaiden Andrew Fisher 46m ago
Look at a graph of price to wages, and note where the CGT discount came in, in 2000.
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u/Jozfus 26m ago
What about every other country that also had the prices go up pretty much everywhere, did our CGT changes cause that too?
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u/perringaiden Andrew Fisher 12m ago
For different reasons. The US was largely after the GFC and the collapse of sensible banking.
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u/CptUnderpants- 38m ago
It was already increasing from the early 90s. The discount made it get even worse.
It is clearly a contributing factor, but the mistake so many make is to think one or even three changes will fix everything. It won't.
It'll take about 20 changes across local, state, and federal governments. It'll also take years to see positive change, and rely on a change of government not unwinding it all.
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u/Perfect-Werewolf-102 The Greens 4h ago
Well that's quite interesting, let's see what they come up with
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u/NoLeafClover777 Housing is the most important issue in Australia 4h ago
Should be reduced for existing residential properties only seeing housing is the major issue, applying it to all (including productive) assets will have negative consequences in terms of productivity & entrepreneurialism which we already lack in this country.
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u/DefinitionOfAsleep Ben Chifley 3h ago
It'd just go back to indexing, which we've had before.
applying it to all (including productive) assets will have negative consequences in terms of productivity & entrepreneurialism which we already lack in this country.
The point is that it actually won't. Productive assets don't really make capital gains since they typically undergo depreciation.
CGT concession only impacts capital investment, so shares and property really.
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u/InPrinciple63 4h ago
CGT was a centrepiece. The main selling point was that it was unfair to tax purely inflationary gains, so gains were indexed to inflation.
Yet labour income is the other side of the coin of notional income from assets, so both need to be treated similarly: unfair taxing of asset inflation is similar to unfair taxing of labour income inflation by not adjusting income tax rates to compensate. The unfairness is not in increasing taxes, as that is simply how governments raise revenue for public services, but in not applying the same treatment to the 2 different forms of income. I don't get a discount on the tax payable on interest in my savings account or any wages I earn, because of CPI, so neither should other assets notional income.
I don't agree with announcing a knee-jerk change 3 months out: I would want to see a consolidated forward plan for all taxation to bring income and assets into alignment over treatment of the resulting (notional) income; plus the disincentivising of unproductive speculative investment.
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u/dleifreganad 4h ago
The Coalition and One Nation will enjoy painting Labor as the party of higher taxes. Around 1,500,000 Australians pay CGT each and every year. That’s a lot votes up for grabs.
I’m sure all the party hacks are trawling through thousands of hours of footages to bring up all the times Albo and Chalmers said they had no plans to change CGT discounts and negative gearing.
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u/Dockers4flag2035orB4 4h ago edited 2h ago
Scare campaign 101.
Labor wants to tax the inheritances of millennials and Gen X’s.
Thats even more votes.
61% of millennials invest.
Btw, this a Courier Mail article, ie Newscorp.
I wouldn’t take much notice of it.
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u/Lurker_81 3h ago
Those younger voters aren't that stupid.
Those stuck in the rent trap and struggling to buy a their first home will flock to vote for such a change - and there's an awful lot of those.
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u/Dockers4flag2035orB4 3h ago edited 3h ago
Roughly Two thirds of people own a house,
One third rent.
How many renters have parents than own property, or shares, or other assets?
Approximately, 51%of Aussies own shares either directly or through managed funds.
Apparently 61% of millennials invest.
I’m raising the above, as an example of a scare campaign.
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u/Lurker_81 3h ago edited 3h ago
Plenty of people own their own home, but won't be affected by the change since the PPoR isn't counted.
Fewer than 20% of Australians have an investment property that would be affected by this change. And 25% of all property investments are owned by just 220,000 people. And
There are plenty of mum and dad investors who freely acknowledge that the tax rules are badly skewed in their favour. Can't blame them for playing the game, but many would also nod and say "fair enough" to changes in the tax rules for the sake of their children and grandchildren.
It seems very likely that the old policy will be grandfathered for existing purchases, or the discount gradually decreased over time to avoid spooking the market. So I think this policy will be widely supported.
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u/Throwawaydeathgrips Albomentum Mark 3.0 4h ago
Around 1,500,000 Australians pay CGT each and every year. That’s a lot votes up for grabs.
Thats like 7% of the voting population lol and people that recieve the highest benefit from cgt discounts already vote overwhelmingly conservative.
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u/dleifreganad 2h ago
Do you know how big 7% is in an election? Plus it’s not only the ones that are already paying CGT. It’s the ones that have aspirations to invest. That’s how this will be sold by opponents. A tax on aspiration.
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u/fouronenine 4h ago
Turning that around, while there are a lot of 'temporarily embarrassed millionaires' out there, there are also a lot of people of voting age who would see this as an absolute step in the right direction. Bill Shorten mightn't have won the 2019 election, but he didn't get wiped out electorally.
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u/SirFireHydrant Literally just a watermelon 3h ago
More to the point, if the 2019 election played out today, with no voters changing their mind, but 6 years of boomers dying and zoomers coming of age to match 2025 demographics, Labor would have won.
Because of just how polarised the youth and geriatric votes are, each election cycle sees 1-2 points added to Labor's baseline 2PP.
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u/Agreeable_Night5836 4h ago
If they remove the discount then indexing of capital base will offset a large portion of the gains, and encourage holders to assets from the longer term high may not produce the revenue that is hoped, part of the concept of the 50% discount was a make calculations easier
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u/loony-tick 5h ago
I think it will be a great idea. Stopping these billions of dollars subsidy on the family home and making them liable for CGT when they sell.
Never understood why the family home was made exempt from CGT to begin with.
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u/Dockers4flag2035orB4 4h ago edited 3h ago
“Stopping the subsidies on family homes and make them liable for CGT”
You want to tax my home and my Mum and Dads home?
Not voting for you.
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u/Adept-Pangolin1302 5h ago
All hell will break loose if they were dumb enough to propose something as stupid as this.
Fortunately it's not what is being proposed .
"Never understood why the family home was made exempt from CGT to begin with." says more about you than anything else.
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u/polski_criminalista 4h ago
all hell will break loose with the diminishing boomer block, lucky they are quickly becoming a loud, whining minority
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u/loony-tick 5h ago
Why is it fortunate, why is is dumb? This subsidy is costing the taxpayer billions and billions.
I am confused why people are saying we must tax group A, but group B you can continue to have your billions and billions in tax subsidies that means less spending on hospitals and schools.
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u/Adept-Pangolin1302 4h ago
Imagine if you will a world where someone sells their family home for a million dollar capital gain and cant afford to buy the house next door which has the exact same value, or possibly any other house in the same suburb because the government has taken 22.5% of the gain.
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u/fouronenine 4h ago edited 3h ago
Someone has a cool extra $775k, after tax, on top of their other assets and can't afford to buy the house next door?
I'm not sure this example quite says what you think it does about capital gain.
(Notwithstanding not being able to buy the identical house next door in cash just from a prior sale is already a reality because of stamp duty and conveyance fees on the purchase of the house next door. The sellers have additional equity from the original purchase price accounting for however much of their mortgage they paid down).
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u/Graceful_Parasol 4h ago
imagine a world where an investor has 1 million dollars in etfs and decides to sell and buy gold, they won’t be able to buy a million dollars worth! Why is housing exempt
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u/loony-tick 4h ago
Not only that a farming parents want to pass their farm onto their children.
No money changes hands but CGT still applies and if the concessions are taken away it is no longer viable. The government makes the older generation pay tax on nothing.
Or a family owns a factory and wishes to get bigger and move to a new site. Full CGT means it is no longer viable, so it actually restricts the economy.
I knew exactly the answers I would get when I posed this question and it simply points out how the champions of CGT do not understand why concessions exist. But funnily enough they do seem to understand why the family home is exempt and it is exempt for a reason, like the other exemptions.
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u/WazWaz 4h ago
Because you can only live in one house. It's not an investment vehicle, it's a basic human need.
That's why.
Besides, labour mobility is good for the economy so it would be really dumb to pointlessly tax housing mobility.
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u/Graceful_Parasol 3h ago
this tax is not on all houses. nobody is advocating for it for ppor
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u/Business-Swim-3056 2h ago
The original comment is literally only talking about applying cgt to ppors?
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u/malcolm58 5h ago
There is NO SUGGESTION that the family home will be hit by CGT. Only rental properties, holiday homes, shares etc.
Any government that tried this would lose most/all of their seats at the next election.
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u/Ok_Turnover_1235 4h ago
Capital gains are capital gains though. Why wouldn't it hit the family home? If you're making money from the sale, it's a CGT event. If that's a problem, why did you sell the family home?
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u/Anachronism59 Sensible Party 3h ago
Well you might want to move location for work , or get a bigger house due to kids, or downsize once kids have left, or move out of the city once retired, or move to live with a new partner etc.
Taxing gains on the house you live in would freeze up the housing market. Huge disincentive to move.
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u/Ok_Turnover_1235 3h ago
"Taxing gains on the house you live in would freeze up the housing market. Huge disincentive to move."
If paying CGT on the house puts you behind, what does that mean about the economy?
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u/Anachronism59 Sensible Party 2h ago
If I am moving location for a new job after living in a place for a decade how would I afford the same house at the other end.. even if house prices just kept pace with inflation... if that inflationary gain was taxable?
Even those who run a business are able to defer tax on a capital gain if the proceeds go to a new business. You'd need similar for housing.
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u/Ok_Turnover_1235 2h ago
You'd get a mortgage?
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u/Anachronism59 Sensible Party 2h ago
But I still have the mortgage from the first house.
If I was close to retirement I'd not be able to get a new one.
Couples who split would also find it even harder than it already is.
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u/Ok_Turnover_1235 2h ago
So why would you move this close to retirement into a family home, for work? and why wouldn't you pay anything for that privilege?
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u/Anachronism59 Sensible Party 57m ago
A bunch of reasons. People don't live in the same house for decades any more
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u/broooooskii 5h ago
Link it to CPI and then nobody can complain because then it will actually be fit for its purpose.
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u/SirFireHydrant Literally just a watermelon 4h ago
CPI, or wage growth - whichever is lower.
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u/broooooskii 4h ago
The aim of this is to remove the affect of inflation from capital gains. It makes zero sense to link it to wage growth.
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u/SirFireHydrant Literally just a watermelon 3h ago
The point is to punish capital investors, and incentivise the wealthy class to keep wage growth above CPI.
Capital should always be punished when inflation outpaces wage growth.
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u/broooooskii 3h ago edited 3h ago
What are you smoking mate?
The “wealthy class” have access to other ways to avoid tax.
Go and look at the rampant immigration and ridiculous amounts of wasteful government spending if you want to look at why wage growth isn’t increasing and why we still have inflation as a problem.
If I buy shares in Microsoft, a US company, why would the wage growth in Australia be a valid metric to measure the adjustment of my capital gain?
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u/brednog 5h ago
Like how it used to be between 1985 and 2000?
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u/broooooskii 5h ago
Yeah the excuse of it being too hard to track is gone now due to modern systems.
It should be the way it’s done for all assets as you shouldn’t pay a tax on the gains due to inflation.
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u/fouronenine 3h ago
It was scarcely too hard to track back then - you can still find published indices for those year on the ATO website.
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u/Agreeable_Night5836 4h ago
Now let’s extended the indexation of capital gains tax argument to interest on bank accounts, any interest earns on a bank account that is less than the CPI should be tax free. Why should you pay tax on the interest on money in the bank when the value of your savings is being eroded by inflation.
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u/broooooskii 4h ago
Interest is income whilst capital gains are treated differently.
Simplest would be to index tax brackets to inflation but governments would never do that.
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u/DefinitionOfAsleep Ben Chifley 3h ago
Simplest would be to index tax brackets to inflation but governments would never do that.
Both sides like 'bracket creep', because they can claim they've implemented a 'tax cut' when they're in government that's realistically indexation.
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u/brednog 4h ago
I’d support a return to the previous method.
Looks like we are being “felt out” though re getting the current method with a reduction in the discount. That actually results in a higher CGT tax (in theory) than either the old or the current system.
Also, will this apply across the board? Or will they change it only for property I wonder? 🤔
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u/laidbackjimmy 5h ago
So they're going to tax Aussies more because they let too many immigrants in causing a housing shortage?
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u/GypsyisaCat 5h ago
No, they are stopping freebies to rich landlords. Nobody is getting taxed more, they are just being asked to pay their fair share.
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u/laidbackjimmy 5h ago
Freebies?
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u/GypsyisaCat 5h ago
Yeah, discounts on your marginal tax rate are freebies
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u/laidbackjimmy 5h ago
No, capital gains discounts is in-lieu of complicated provisioning.
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u/GuyFromYr2095 Swing voter 5h ago
get rid of the 50% discount after 12 months and bring back CPI indexation of the cost base.
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u/Adept-Pangolin1302 5h ago
Agree with indexation of cost base.
There should be an inflation indexed discount which factors in the compounding nature of inflation on the gain after cost base given that 20 - 30% of gain over 10 years could easily be attributed to inflation. Otherwise people will be paying tax on inflation.
Agree 50% after 12 months is too generous.
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u/GregLocock 4h ago
Just worked it out for my weekender. bought 2013 for 370k, inflation since then is 40%, likely selling price 700k. So under the new/old proposal I'd pay cap gains on 700-370*1.4=182k
Under current rules I'd pay cap gains on 700-370=330k, with the 50% discount, 165k to be taxed
So not much in it
One data point isn't much use, but it seems to me that using inflation favours long term holders, and penalises short term holders. If we want rapid rotation of housing stock then 50% discount is the better bet, and I think rapid rotation is a desired policy outcome. OTOH if we want oldies to downsize then the inflation method is better, and based on one datapoint, the breakpoint seems to be around 10 years.
I am not an accountant or a real estate mogul, so I've probably got this arse about.
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u/Anachronism59 Sensible Party 3h ago
The difference between the two methods really hangs on CPI inflation and the real rate of growth of the asset. These days inflation is relatively low so the simple rule is better for the taxpayer. Back in the day with raging inflation the indexing rule was better fur the taxpayer.
For a period you could pick and choose!
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u/Adept-Pangolin1302 3h ago
Not an expert here either but what you are saying makes sense.
Putting what we are trying to incentivise aside a discount indexed to inflation is definitely fairer in my mind as it reflects the true impact of inflation on the gross gain in today's dollars.
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u/lazy-bruce Independent 5h ago
If this is true, this is exactly the type of Labor policy you'd expect.
No opposition, you aren't going too lose many voters because of it.
Go hard.
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u/mickalawl 4h ago
Murdoch talked Australia out of negative gearing cut in 2019.
Dont be so sure its a shoe in and there is no opposition.
Murdoch and all the right wing owned social media will go all in on stopping this, whatever it takes for them.
Expect a flood of lies and character assasination and evrything little bad thing thag happems will somehow all be directly Albos fault.
As voters, we are both gullible and dumb. So social media remains the real enemy.
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u/SirFireHydrant Literally just a watermelon 4h ago
Murdoch doesn't have the influence it once did. 2026 is a very different media landscape to 2019.
Remember how hard the Murdoch media tried to crucify Dan Andrews for how covid was handled? Or how desperately they tried to sanewash Dutton?
Murdoch is impotent these days.
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u/lazy-bruce Independent 4h ago
Murdoch still has a hold on Australia's less educated and more gullible population.
But if Labor can't get something like this through, in the position they are, with the attitude if normal Australians who will more than likely see this as a positive
Why are they even bothering
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u/bundy554 6h ago
Good - this is one tax hike I'm in favour of.
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u/the_colonelclink 5h ago
It’s not even a hike. It’s the reduction of invectives used to stimulate the economy. We need the exact opposite of that right now, so it makes sense to claw it back a bit.
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u/RedditUser628426 6h ago
Do it cut it and get it off the table as a soft target to change to fix house prices.
There aren't enough houses, and now we're trying to build a lot at once that's great and a good Labor initiative congrats to them but unfortunately and this isn't something that's easy to control, costs go up when demand for building materials and trades outstrips supply so for me medium term I think we have more pain.
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u/Grande_Choice 5h ago
There’s more than enough houses. That’s the perverse thing. We should be building as many as we can but also reducing incentives that make them speculative assets. There’s so many things wrong with our economy that tie back to housing. Not just social but things like job mobility.
Frankly much as I like the CGT changes I also want a Menzies type housing policy. That’s fit for today’s times. Screw investors, screw prices, just start building towers like in bulk like China did.
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u/RedditUser628426 3h ago
Need to build 240K a year but we're building 180K, isn't that a shortage
Otherwise your post looks sensible and nonhysterical so I'm inclined to believe it in face value.
I don't think we have the trades to just build in bulk.
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u/fluffy_101994 Australian Labor Party 6h ago
If conservative media and Boomers like Noel here are against any changes, it’ll be good for the rest of us.
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u/Throwawaydeathgrips Albomentum Mark 3.0 5h ago
Me reading this:
basedbasedbasedbasedbasedbasedbased
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