Labor set to push through tax reforms despite backlash
An ‘overall framework’ on tax reform will be introduced to the parliament despite warnings capital gains tax changes will still hit successful businesses.
Labor will proceed with controversial tax changes impacting businesses and property investors as it prepares to introduce an overall framework for reform.
Treasurer Jim Chalmers will introduce a bill to parliament on Thursday that will include increases to investor tax rates alongside a $250 a year tax rebate for workers and a $1000 standard tax deduction.
Dr Chalmers has said the changes will help young people who have been locked out of the housing market by a system that taxes income earned from labour at a higher rate than income derived from investments.
Assistant treasurer Daniel Mulino said the government, which is seeking to get the legislation passed in June, was moving fast to provide clarity by laying down an “overarching framework” as quickly as possible.
“It’s very normal that there’d be an overarching framework, and that there’d be consultation on particular issues, which is exactly what we’re doing,” he told ABC News Breakfast.
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Responding to concerns raised by WA Premier Roger Cook about possible impacts to the mining sector due to the changes, Dr Mulino said the federal government would work with him in good faith.
Dr Mulino also watered down hopes that the fuel excise cut will be extended beyond the end of June, saying the economic conditions and status of the war in the Middle East would need to be assessed.
While the majority of economists and business groups have acknowledged the need for tax reform, the government has taken flak in particular for the proposed changes to the capital gains discount.
Rather than confining the change to property and leaving the existing 50 per cent discount for gains made on the sale of shares and businesses, Labor has applied its new indexation regime across the board.
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The government has acknowledged that creates an issue for startups, which have a low initial capital base, and is consulting on potential amendments with industry groups, including the Australian Chamber of Commerce and Industry.
The chamber’s chief executive Andrew McKellar on Wednesday called on the government to scrap the changes for businesses and keep them confined to housing.
He warned the tax changes will result in less business investment.
“That will be bad for productivity. That will be bad for competitiveness. It will be bad for the future growth of the Australian economy,” he said.
Capital gains exemptions already exist for small businesses with turnover below $2 billion.
But that in effect punishes successful businesses who go from paying basically no capital gains tax to a relatively high tax rate because of rapid growth, said UNSW professor of economics Richard Holden.
“That basically says our tax system is going to identify the most dynamic, highest-productivity growth, highest-employing, most successful small businesses that are becoming big businesses, and tax the hell out of them,” he told AAP.
Shadow Treasurer Tim Wilson accused the government of “knee-capping” small businesses.
“Unless the treasurer’s ambition is to keep small business small … these exemptions simply don’t meet the needs of all small businesses in this country,” he said.
Dr Chalmers said the reason the changes were not ring-fenced to housing was because the government wanted to iron out distortions from the tax system.
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