Labor’s controversial tax increase on capital gains and deposits has been rolled back, following a sustained attack on the measure and a drop in votes, while Prime Minister Anthony Albanese announced expanded exemptions for small businesses with sales of up to $10 million.
“Following the consultation we had on budget night, we are announcing details to allow more small businesses to reach a profit tax deal,” he said at a press conference in Sydney alongside Treasurer Jim Chalmers.
“Today, we are announcing that we will increase the existing small business 50 per cent of assets subject to CGT from $2 million to $10 million,” he said, revealing that an estimated 2.7 million businesses could continue to claim the 50 per cent capital gains deduction introduced by former prime minister John Howard in September 1999.
Albanese said the government will also propose a “new business tax agreement” for startups, like . A consultation paper on the move will be released later today.
The government will also remove all bequests from its proposed 30 per cent minimum tax after the opposition branded the measure a “death tax”.
Chalmers denied that he had ever had a death tax in the budget.
“Look, there is absolutely no inheritance tax or inherited property tax in the budget. That was clear already, but we are making it more clear,” he said.
“We put it beyond any doubt, so that all types of voluntary bequest trusts will continue to be exempt from the minimum, subject to some integrity measures that we will consult.”
There are approx work in Australia. It only comes into effect after a person dies, and allows the owners of assets to decide how the income from those assets is distributed after they die.
Only new discretionary trusts created after budget night would be taxed, and fixed trusts would be exempt.
Labour’s original proposal included scrapping the existing 50 per cent capital gains deduction and replacing it with a cost-based inflation index as well as a 30 per cent minimum tax.
Indexing the cost basis for inflation means investors will only be taxed on the net gain in value of the property they sell.
But this method has shocked many startups and small businesses, which tend to start with a low cost base and therefore will get a discount close to nothing less than the proposed change.
That raises the top capital gains tax rate from 23.5 percent to nearly 47 percent, assuming property owners earn more than $190,000 in the year they realize their gains.
A two-day parliamentary inquiry into the legislation heard some of Australia’s most successful companies could not survive without the 50 per cent discount.
Prime Minister Anthony Albanese has refused to say whether changes to the government’s tax changes announced today were made to reduce opposition aimed at Labour.
When asked directly if the motivation for the change was to “eliminate the opposition”, Albanese said: “Our ranks strongly support this reform”.
He said the new exemptions would cost the budget $475 million, based on indicative costs, but noted that the three tax reforms were expected to add about $8.1 billion over the previous estimate.
Albanese emphasized that the comments he has received about the government budget have been positive.
“The feedback I’ve had from young Australians is, young Australians who have been able to get into their first home, they and their parents and their grandparents, saying that for the first time, after they went together, they tried to get a fair crack at the housing market, that they’re finally getting the right,” Albanese said.
“This Saturday when the first home buyers will go to the auction, if it is an existing house, they will not compete much with investors, of course, they can still invest in existing houses, but they will not be able to use negative gear going forward, they see that as a very positive thing,” he said.
Albanese said his government is “giving young people the same crack”, and that house prices will continue to rise but at a slower pace than before.
Opposition Leader Angus Taylor has called on the government to “repeal” its entire budget, despite changes to tax measures announced today.
“This budget is in chaos. It is in a bad state, because the government got it wrong from the beginning. There is no need to continue with these drawings. Delete it, delete the bill, start the budget again, because they got it wrong,” Taylor told a press conference in Sydney this morning.
“They are taking this country in the wrong direction, and some of the hardest working people in this country are being told they will not be rewarded for the hard work they do every day.”
The union has maintained its position since the announcement of the budget that they will oppose the announced tax measures, meaning that the government will have to negotiate with the MPs in the Senate for the bills to be passed.
Nick Newling is a federal politics reporter for The Sydney Morning Herald and The Age.Connect through X or email address.
Max Maddison is a government reporter for The Sydney Morning Herald.
