Driven as it is by ideology, the Albanese government budget’s unintended consequences, which become more glaring by the day, point to a lack of foresight and flawed belief in redistribution. Business groups warned on Tuesday that carve-outs for certain sectors in the government’s controversial capital gains tax grab will be “unworkable and inadequate”. Broken tax promises would set the start-up economy back a decade, Melbourne investment banker and corporate adviser David Williams predicted, driving investments overseas. While the Treasury is consulting the tech industry and start-ups on possible exemptions to CGT laws, calls are growing on behalf of other small businesses. Nationals leader Matt Canavan says the impact on farmers from the CGT changes will be similar to the start-up sector because the changes “are a handbrake on anyone who wants to grow a business and hence they are a handbrake on our economy, productivity and growth”.
In another unintended consequence, businesses and families across the country face the prospect of a surprise stamp duty bill if they are forced to restructure their trusts in the wake of budget changes, Matthew Cranston wrote on Tuesday. A multibillion-dollar fight is looming with the states over the revenue. And while Anthony Albanese, Jim Chalmers and Social Services Minister Tanya Plibersek claim the crackdown on new testamentary discretionary trusts is designed to stop the wealthiest Australians avoiding tax obligations, estate planners say the inheritances of vulnerable people will be affected. Nor should Reserve Bank chief economist Sarah Hunter’s warning that interest rates and looming tax changes could soften the property market be ignored.
As the Prime Minister and the Treasurer tout intergenerational equity as their raison d’etre for budget tax changes, those at risk of being hardest hit, in another unintended consequence, are young investors, who have been the largest growth cohort to make income out of assets in the past decade. The Australian’s analysis of tax office data shows a 365 per cent increase in the number of 18-24-year-olds, 351 per cent increase in 25-29-year-olds, and 246 per cent increase among 30-34-year-olds reporting capital gains.
Mr Albanese and Dr Chalmers are either out of touch with thrifty, enterprising young people likely to lose out or they want to penalise them. Likewise the 747,000 wage earners who declared capital gains last year. Tax office figures shows two-thirds of people who reported capital gains also earned salaries or wages , making a mockery of Dr Chalmers’ claim that removing the CGT discount “is about better aligning the tax system for workers and people who earn their income from assets”.
As Paul Kelly writes, shifting to a conviction agenda looms as the decisive event in Mr Albanese’s prime ministership: “On display now are the real values of Albanese-Chalmers in their political and economic calculations – the policies they walked away from post-2019 are the policies they now embrace.”
Dennis Shanahan belled the cat on Tuesday when he recounted Mr Albanese’s class war rhetoric to the 1991 ALP conference, when he was a young official arguing for a death tax. Mr Albanese, Shanahan wrote, quoted a conference delegate who said: “Accumulated income in the form of capital is, for all socialists, at least part of the source of many social injustices.”
Dr Chalmers has dusted off ideas from his 6000-word essay from January 2023 on why “neoliberalism” had to be reformed to deliver “social capitalism” built on “fairness” and a “values-based” economy. The Chalmers doctrine, we noted at the time, “threatens to inject government into the centre of both corporate behaviour and investment decision-making”. It rejected supply-side economic theory that advocates tax cuts to encourage job creation, business expansion and entrepreneurial activity.
While punishing asset holders, the budget offers only negligible personal tax relief that will be swallowed by bracket creep. The government claims its model is “fairer” but, as Kelly writes, “it seems most fair to the government via extra revenue … they won’t touch the Keating reform method – broaden the tax base and slash the personal rates”. Labor has misjudged the size of the backlash, not learning from Bill Shorten’s failure in 2019. Dividing but not growing the economic pie will erode the wealth of too many, who deserve a fairer go.
Driven as it is by ideology, the Albanese government budget’s unintended consequences, which become more glaring by the day, point to a lack of foresight and flawed belief in redistribution. Business groups warned on Tuesday that carve-outs for certain sectors in the government’s controversial capital gains tax grab will be “unworkable and inadequate”. Broken tax promises would set the start-up economy back a decade, Melbourne investment banker and corporate adviser David Williams predicted, driving investments overseas. While the Treasury is consulting the tech industry and start-ups on possible exemptions to CGT laws, calls are growing on behalf of other small businesses. Nationals leader Matt Canavan says the impact on farmers from the CGT changes will be similar to the start-up sector because the changes “are a handbrake on anyone who wants to grow a business and hence they are a handbrake on our economy, productivity and growth”.
In another unintended consequence, businesses and families across the country face the prospect of a surprise stamp duty bill if they are forced to restructure their trusts in the wake of budget changes, Matthew Cranston wrote on Tuesday. A multibillion-dollar fight is looming with the states over the revenue. And while Anthony Albanese, Jim Chalmers and Social Services Minister Tanya Plibersek claim the crackdown on new testamentary discretionary trusts is designed to stop the wealthiest Australians avoiding tax obligations, estate planners say the inheritances of vulnerable people will be affected. Nor should Reserve Bank chief economist Sarah Hunter’s warning that interest rates and looming tax changes could soften the property market be ignored.
As the Prime Minister and the Treasurer tout intergenerational equity as their raison d’etre for budget tax changes, those at risk of being hardest hit, in another unintended consequence, are young investors, who have been the largest growth cohort to make income out of assets in the past decade. The Australian’s analysis of tax office data shows a 365 per cent increase in the number of 18-24-year-olds, 351 per cent increase in 25-29-year-olds, and 246 per cent increase among 30-34-year-olds reporting capital gains.
Mr Albanese and Dr Chalmers are either out of touch with thrifty, enterprising young people likely to lose out or they want to penalise them. Likewise the 747,000 wage earners who declared capital gains last year. Tax office figures shows two-thirds of people who reported capital gains also earned salaries or wages , making a mockery of Dr Chalmers’ claim that removing the CGT discount “is about better aligning the tax system for workers and people who earn their income from assets”.
As Paul Kelly writes, shifting to a conviction agenda looms as the decisive event in Mr Albanese’s prime ministership: “On display now are the real values of Albanese-Chalmers in their political and economic calculations – the policies they walked away from post-2019 are the policies they now embrace.”
Dennis Shanahan belled the cat on Tuesday when he recounted Mr Albanese’s class war rhetoric to the 1991 ALP conference, when he was a young official arguing for a death tax. Mr Albanese, Shanahan wrote, quoted a conference delegate who said: “Accumulated income in the form of capital is, for all socialists, at least part of the source of many social injustices.”
Dr Chalmers has dusted off ideas from his 6000-word essay from January 2023 on why “neoliberalism” had to be reformed to deliver “social capitalism” built on “fairness” and a “values-based” economy. The Chalmers doctrine, we noted at the time, “threatens to inject government into the centre of both corporate behaviour and investment decision-making”. It rejected supply-side economic theory that advocates tax cuts to encourage job creation, business expansion and entrepreneurial activity.
While punishing asset holders, the budget offers only negligible personal tax relief that will be swallowed by bracket creep. The government claims its model is “fairer” but, as Kelly writes, “it seems most fair to the government via extra revenue … they won’t touch the Keating reform method – broaden the tax base and slash the personal rates”. Labor has misjudged the size of the backlash, not learning from Bill Shorten’s failure in 2019. Dividing but not growing the economic pie will erode the wealth of too many, who deserve a fairer go.