Is FIRE now a hopeless dream in Australia?
I’ve been hearing a lot about these proposed CGT changes and decided to run the numbers myself. And it looks worse than I thought.
If you earn $100k as normal salary, you pay about $22.8k in tax including Medicare levy.
Under the previous rules, if you make a $100k capital gain and get the 50% CGT discount, you only pay tax on $50k. So if you did this in a low income year, you might only pay around $6.5k including Medicare.
Under the new proposed rules, if the minimum tax is 30%, then on a $100k taxable capital gain you could be paying about $32k including Medicare levy.
That is around $25.5k worse off on a single $100k gain from one policy change.
I know there is the indexation side of it and maybe I am missing something, so happy to be corrected. But from a basic calculation, this seems like a massive hit to anyone trying to build wealth through ETFs and long term investing.
The whole idea of FIRE is you save hard, invest consistently, take the risk, and eventually live off the returns. But if the rules keep changing and the tax on those returns gets increased this much, it just feels like the goal posts are getting moved while people are trying to get ahead.
I understand the tax system needs to be fair, but this feels less like fixing a loophole and more like punishing people who are trying to become financially independent and not rely on the government later in life.
Am I overreacting or does this seriously make FIRE way harder in Australia?