CGT changes are similar to a 24pp increase in effective income tax, at least for me
I'm in my early 40s, currently have pre-tax annual wages of approximately $250k, and a share portfolio worth somewhere around $1.2 million. I save about 45% of my after-tax wages in shares, and don't own any property. My effective income tax rate is 33%.
I analysed the impact of the CGT changes on my personal wealth, to see what is all means for my retirement. I assumed 10% nominal growth in the share portfolio, 2.5% inflation and pre-tax wage growth, 45% savings rate, and 15 years until retirement. I made some assumptions here for simplicity. For example, I am not a index investor and I trade every 1 to 1.5 years.
The conclusion is that the change in cgt is similar to a 24 percentage point increase in my effective income tax rate to 57%. In other words, a (a)33% effective income tax and inflation indexation for shares is equal to a (b)57% effective income tax and a 50% cgt discount.
I was very upset when I first heard of the CGT changes for shares, and this analysis leaves me quite depressed.