Why the new CGT changes are terrible for the working class
Removal of 50% CGT discount for ALL assets and introducing a minimum of 30% tax rate is purely a tax hike which actively works against the working class, productive investments and house prices.
1. Does nothing to bridge the gap, just pulls the ladder up from behind you.
Rich boomers and the already ultra-wealthy have all their profits made until 2027 grandfathered. No dent at all to their net wealth and they are still laughing with massive capital gains from last 30 years all grandfathered.
Negative gearing is also grandfathered but doesn't usually affect boomers who bought their properties 30 years ago.
2. Just punishes the future generation
The people actively trying to build wealth, and future generations, will get slogged by higher taxes than previous generations and enjoy none of the benefits they got.
Most young people are investing in shares to build their initial wealth, this change is terrible for them. They now need to roughly save 20-25% more for their house deposit, car, holiday, medical bills, pretty much anything people invest and save up for.
It punishes single income families who bought shares in their stay-at-home wife's name. Punishes middle class families with small buffers that need to sell down shares to pay for any unexpected large expenses or bills.
3. Doesn't help with property prices
Properties still have the leverage advantage, so without some kind of tax incentive for other assets to divert investors away, investors will continue to invest in property. Removal of NG, will now favour higher yield properties (lower priced/regional) which competes in the same price bracket as first home buyers unfortunately.
I think the net effect is that houses below ~$550k will actually see higher demand from investors. The minimum price of houses/units/townhouses will increase because anything neutrally/positively geared will be snapped up by investors.
Landlords will try to set the rent at the maximum market rate to increase their yield (I know there are landlords out there who were happy to keep a lower than market rate if their tenants look after the property well).
If they had kept the CGT discount for new businesses, venture capital, start ups, entrepreneurs and shares etc, that would've been far better for house prices and also our productivity and innovation.
4. Disincentivises productive asset investments
Taxing all assets a minimum of 30% and not just property actually works against incentivising investors into investing in productive assets and reducing house prices.
No incentive to take risks to create economically productive businesses leading to jobs and wage growth.
It actually makes it worse to do riskier investments like startups and shares since the risk-reward ratio has decreased across all asset classes equally, so people may just stick to safe brick and mortar.
5. Big brain drain, suffering productivity rates and innovation
The tax hikes for small businesses, venture capital, startups and shares will be the final blow to our dead productivity rates. We want entrepreneurs and investors to support new businesses, research, production and startups.
They take incredible risk as 95% startups fail and investors/business owners can lose all their money.
When's the last time Australia invented anything useful? Maybe the cochlear implant decades ago, nowadays all we do is dig dirt and give tax-free gas away.
Labour is a no-risk, fixed income job, you aren't risking your life savings from having a job. So I don't understand the argument about income and CG needing to be taxed the same. CG is taxed worse than income now since it is minimum 30%.
6. It affects working class more not less!
I see people saying like 80% of the CGT change savings will affect the top 10% so it's a good policy. Firstly, that stat is already misleading since most people sell down shares in chunks for a large purchase, so that will automatically skew their tax bracket for that single year.
Even if the nominal amount of tax savings are higher for rich people, this change will actually affect the working class more.
It's like how 90% of income tax comes from the top 10% but the rich are still doing well.
If you tax 30% of working class capital gains vs 30% the ultra wealthy, it will significantly impact the work class's ability to build wealth more compared to those already wealthy.
Scaling that up to a billionaire, if you tax someone with $1b 95% of their wealth vs someone worth 100k 95%, who is it going to affect more? I feel like people are shooting themselves in the foot just to see the rich 'suffer', but the rich are probably the least affected by this and this policy fucks up the middle class most.
From now on, anyone building wealth from scratch are going to have a much harder time than the boomers who already achieved their wealth grandfathered until 2027 from all the tax savings that the new generations won't get anymore.
7. Your super isn't safe
People are saying just invest into super which you can't access for another 30 years. Labor has already tried to increase taxes for super, it's only a matter of time before super is the next tax grab. Also super doesn't help people investing outside of super for life expenses.
I know a new parents who set up and investment account for their infant daughter's first house deposit. He buys $100 worth of shares every month for her. Now that is going to be taxed significantly more when the daughter grows up and tries to buy a house in 30 years time.