Business groups have united to call on the government to dump its changes to capital gains tax, arguing it will “discourage investment”, as the first tranche of tax reforms undergoes a parliamentary inquiry.
The government has faced fierce backlash, particularly among business, for its recent budget measures which include replacing the 50 per cent capital gains discount with a deduction tied to inflation and curbing negative gearing for property investors.
The tax reforms, described as the biggest shake-up of the tax system in 25 years by Treasurer Jim Chalmers, will face a short-burst two-day inquiry from today.
The three major business groups — the Australian Chamber of Commerce and Industry, the Business Council of Australia and the Council of Small Business Organisations Australia (COSBOA) — set to appear jointly this afternoon, have issued a joint statement with Australian Industry Group, calling on the parliament to “reject the rushed legislation”.
“If passed, these changes will affect businesses of every size, from companies investing in major projects to small and family-run businesses seeking to grow, create jobs and support their local communities,” they said in a statement.
“We urge the Parliament not to proceed with the legislation and consult with the business community in good faith to fully assess its consequences.”
Business advocates have been vehemently opposed to CGT changes affecting investment beyond housing, stating it will push capital and talent offshore.
The groups are united ahead of their appearance, with COSBOA previously breaking away to advocate for the small business threshold to be lifted from a turnover of up to $2 million and net assets of $6 million, to $10 million and $12 million respectively.
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While more than 90 per cent of Australia’s small businesses have access to one of four CGT concessions and exemptions, the threshold increase would open the door for a further 200,000.
Chalmers has been careful not to rule out extending CGT carve-outs, beyond those for startups and the tech sector announced on budget night, as consultation continues.
The Housing Industry Association will also appear on Monday, after claims the government had barred the group alongside other key critics of the budget measures, including high-profile investor Geoff Wilson, from appearing in front of the inquiry, according to reports last week.
Economist Saul Eslake is largely supportive of the government’s capital gains tax changes. (ABC News: Daniel Irvine)
Independent Economist Saul Eslake is among the witnesses who supports the capital gains tax and negative gearing changes, as well as a proposal for a 30 per cent minimum tax on the taxable income of discretionary trusts.
Mr Eslake will argue that it is an appropriate response to ensuring people contribute towards public expenditure such as hospital, schools and aged care, in proportion to their abilities and wealth.
He’s also not convinced the 1999 changes to capital gains tax under the Howard government “did any good”.
“The changes to the capital gains tax regime haven’t turned Australia into a nation of shareholders or entrepreneurs, as was one of the arguments in support of them when it was introduced in 1999,” he told ABC News ahead of his appearance.
“The proportion of Australians who are owner managers of their own businesses or who are direct shareholders in companies has actually gone down since that change was introduced, while the proportion of us who are leveraged property speculators has gone up.”
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The government hopes to secure the support of the Greens to push the legislation through the Senate before the July mid-winter break.
However, it could face a delay on the tax reforms as well as legislation to overhaul the National Disability Insurance Scheme, if the Greens and Coalition join forces to call for longer inquiries.
The Greens are critical of rushing through the NDIS changes, while the Coalition would like to see a longer inquiry window around the tax reforms.
