Housing Minister Clare O’Neil has vowed the government will “speedily” resolve questions around who will get carve-outs from the controversial changes to capital gains tax discounts as it seeks to bed down its budget swiftly.
She became the latest minister to acknowledge the plan to replace the 50 per cent discount on capital gains tax with one based on inflation is problematic for businesses that start with very low costs and grow quickly.
Prime Minister Anthony Albanese and Treasurer Jim Chalmers are consulting with the tech sector, small businesses and farmers over the plans.
However, whatever position they land on to offer exemptions or carveouts from the changes beyond investments in property is unlikely to be reflected in the tax legislation the government is pushing to pass by the end of June.
Mr Albanese has said changes will come in a second tranche of legislation later in the year.
He’s also cautioned people against expecting big changes, saying the fundamentals of the CGT plan will remain.
Lobby groups representing larger businesses are worried about a unified front splintering if the government agrees to a request from small business advocate COSBOA and the National Farmers Federation to lift the threshold for small businesses to get CGT exemptions.
Ms O’Neil said there were a range of options on the table.
“The government wants to get the right outcome here, and we’re not going to be driven by the politics of the moment. It’s really important that we reach the right landing point for this,” she told ABC’s Insiders.
“The new model of CGT calculation isn’t perfect for that kind of model of the economics of a small business that starts with no cost base and grows really quickly.
“It’s important that this gets resolved speedily, and that’s what the government’s working towards.”
The Greens threw a potential spanner in the plan on Sunday when senator David Shoebridge said the party that holds a key voting bloc doesn’t want existing investors to have their tax breaks kept for more than one property.
The government has promised that anyone who had a negatively geared investment property before the May 12 Budget was unveiled will be able to keep doing so.
One Nation wants it limited to two properties, while the Coalition completely opposes the tax changes.
“Labor says that people with 10, 20, 30, 100 properties can retain all of their lurks, their capital gains tax and negative hearing tax benefits. How is that delivering intergenerational equity?” Senator Shoebridge said.
The Greens will use a three-week committee inquiry into the bill to mount a case for limiting grandfathering, before it enters negotiations with Labor over whether to pass it through the Senate.
That committee will decide this week whether it will hold public hearings.
Ms O’Neil said scrapping or curtailing the grandfathering arrangements went against the principle that government “shouldn’t make dramatic tax changes to systems and affect people’s day-to-day management of their household budget”.
“There’s people in the debate who want to see the government go further. I really understand that, but I just think we need to step back,” she said.
But she said that the capital gains tax changes would be “well into the future for most people” and those who sold assets at a profit “get to bank that capital gain that they’ve made.”
The Coalition has vowed to scrap any changes to capital gains discounts and negative gearing along with a 30 per cent minimum tax on discretionary trusts if it wins the next election.
It’s also promised to index marginal tax thresholds to eliminate bracket creep.
All up its plans would leave the budget bottom line $110 billion worse off over four years and $544 billion worse off over nine years, an analysis by Dr Chalmers’ office claims.
The Treasurer labelled this a “multi-billion-dollar debt bomb.”
His shadow Tim Wilson said the claims amounted to an admission that the Government was “hitting us with $273 billion in taxes Australians didn’t vote for”.
“Labor’s tax hits reach every corner of the economy: renters, first home buyers, small businesses, start-ups, and families saving to get ahead,” he said.
“Almost three weeks on from budget night, the Treasurer still can’t say what is actually in his budget, which small businesses will be spared his new taxes, and which won’t.”
