Treasurer Jim Chalmers has defended the government’s proposed capital gains tax reforms, rejecting claims of a policy backflip and arguing the changes will expand support for small businesses while maintaining the broader goals of the federal Budget.
Speaking to Sky News, Dr Chalmers said the government’s latest announcements followed consultation that had been flagged when the Budget was handed down.
“Not at all. This is the outcome of the consultation that we flagged in the Budget papers themselves,” he said.
“We’re putting out this consultation paper on startups, we’re making sure that 100 per cent of the 2.7 million active small businesses have got access to the CGT concessions and carve-outs, we’re announcing a whole range of implementation details as we flagged on the night.”
The Treasurer said the government would retain all four existing capital gains tax concessions and carve-outs while expanding eligibility for the most widely used concession.
“The most important one, which is around turnover, we are making it much broader and much more generous, lifting that threshold from 2 million turnover to 10 million turnover,” he said.
“And what that means is every single one of the 2.7 million active small businesses, 100 per cent of them, will have access to concessions and carve-outs, and 98 per cent of businesses overall.”
The government has faced criticism from business groups, investors and sections of the opposition over changes to capital gains tax arrangements announced in the Budget. Questions have also been raised about the impact on startups, where founders often begin with little or no capital base.
Dr Chalmers said the government had recognised those concerns before the Budget and had continued discussions with the startup sector.
“We recognised that privately, before the Budget, in the Budget papers themselves and that’s been the basis of all of this meaningful and genuine consultation that we’ve been doing with the startup sector and small business and others,” he said.
He said a consultation paper released on Thursday proposed a separate approach for startups, including a 50 per cent discount subject to conditions relating to the age of the business, turnover levels and the length of time shares are held.
“It’s all about making sure that we’re encouraging, rather than discouraging, investment in the startup sector, a really important dynamic part of our economy.”
The Treasurer also sought to address criticism that the reforms could create uncertainty around family trusts and inherited assets.
“There are absolutely no inheritance taxes or taxes on inherited assets in the Budget,” he said.
“We’re putting that matter beyond any doubt so that all types of discretionary testamentary trusts continue to be exempt from the minimum, subject to some integrity measures that we will consult on.”
Dr Chalmers argued that consultation on implementation details was a normal part of major tax reform and said multiple pieces of legislation would be required to enact the changes.
“It would be unusual if we weren’t consulting on a tax reform package which is this broad and this ambitious,” he said.
The Treasurer maintained that the reforms were aimed at improving housing affordability and reducing what he described as distortions within the tax system.
“Having taken that decision to remove the distortion for established housing, which has seen this big decoupling of house prices and wages in our economy, having taken that decision, the next step is to apply the discount in a fairer and more neutral way.”
Asked whether he had been surprised by the reaction to the Budget, Dr Chalmers said controversy was inevitable when governments pursued economic reform.
“Economic reform in this country is always contested, it’s always contentious, and particularly when it comes to tax reform, but it’s worth it,” he said.
“It’s worth it because it’s about making it easier for people to buy their first home, and cutting income taxes for workers again and again.”
The Treasurer said the government had chosen what he described as “the hard road of reform” despite political risks, arguing that maintaining existing arrangements would leave future generations facing the same housing and tax challenges.
“We’re persevering regardless, because this is really important for the country.”
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