On Thursday, the Government introduced its changes to capital gains tax (CGT) and negative gearing to Parliament.
The changes were first announced in the Federal Budget. Treasurer Jim Chalmers said the changes will be legislated in parts, with small business and startup consultation to inform later elements.
The Opposition has flagged it will not support the changes, while accounting body CPA encouraged the Government to “consult first and legislate later.”
Here’s what you need to know.
CGT
CGT applies to the profit from the sale of an investment, including property and shares.
Since 1999, if you held an investment for more than 12 months, you only paid tax on half the profit when you sold it.
From 1 July 2027, the flat 50% discount is gone. Instead, your original purchase price will be adjusted to account for inflation. You’ll only pay tax on the gain above that adjusted figure.
But, no matter what, you’ll always pay a minimum tax rate of 30% (on gains made after 1 July 2027).
Negative gearing
Gearing refers to borrowing money from a bank for a purchase, such as an investment property.
Negative gearing is when a landlord spends more on an investment property than they make from the rental income.
Under negative gearing, this loss can be deducted from their taxable income, so they pay less tax overall.
The Government announced negative gearing will be restricted to newly built properties, taking effect from 1 July 2027, but applying to homes bought on or after Budget night (12 May).
Bill
On Thursday, Chalmers introduced bills covering changes to CGT and negative gearing changes to Parliament.
Your contribution ensures The Daily Aus can continue doing the work you love.
I want to give $10 monthly to help TDA keep doing the news.
Your details:
The Treasurer said the CGT change “better aligns the tax rate on gains with the tax rates paid by most workers.”
He said negative gearing “will continue to support those residential properties which genuinely add to supply”.
The Government has flagged it will consult on potential carve-outs, including for small businesses and start-ups.
It said it had introduced only the “core” parts of its changes to Parliament and would proceed with more changes later.
“This provides certainty to taxpayers and the market, while enabling further consultation,” Chalmers said.
Specifically, this includes “consulting with stakeholders on the treatment of capital gains of small and startup businesses”.
Opposition
Opposition Leader Angus Taylor called the changes “toxic taxes” that the Government “wants to rush... through the Parliament without proper scrutiny.”
Taylor said he would “love the Prime Minister to be honest about how this capital gains tax is going to work for small businesses.”
CPA Tax Lead Jenny Wong said: “Introducing significant tax changes into Parliament before properly engaging with affected stakeholders is not how tax reform should be done.”
What’s next?
Labor has a majority in the House of Representatives (lower house), so the bill will pass. It will need support from the Coalition, or minor parties and crossbenchers to pass it through the Senate (upper house).
The Coalition has criticised the changes, while the Greens will make their stance clear following a Senate inquiry report due 22 June.
“[They] will go through the inquiry process to ensure they get the scrutiny they need,” Greens Leader Larissa Waters said.
