This wasn’t just a Budget, it was electoral suicide. Anyone still cheering it on either hasn’t read the fine print or doesn’t understand it. As the details filter through to ordinary Australians and the negative impacts hit home, I predict Labor’s days are numbered.
The sheer idiocy and unfairness of the Budget is perfectly illustrated by just one measure: the new 30 per cent minimum tax on capital gains. Let’s be clear from the outset. This has nothing to do with housing affordability or helping first home buyers. It applies to all asset classes currently subject to capital gains tax. It is a tax grab.
My main objection is that it punishes the very people Labor claims to champion – young aspirational Australians trying to get ahead. Few future first home buyers simply stuff their savings in a low-interest bank account for a decade. They invest sensibly in ETFs, equities, crypto, or bullion to build a deposit. Now, regardless of their modest income, that growth will be hit with a 30 per cent minimum tax. First home buyers haven’t been given a leg up – they’ve had the rug pulled out from under them, then been billed for the carpet burns.
The hardest hit are actually the lowest paid. Take the university student scraping by on casual jobs earning $15,000 a year, or the part-timer on up to $45,000. These people sit in the 0 or 16 per cent tax brackets. Under Labor’s new rules, their investment gains will now be taxed at 30 per cent. The ‘workers’ party’, and the Greens if they back this, are deliberately increasing the tax burden on the lowest earners in society.
The same sting applies to traditional families. A basic, sensible tax strategy has long been to hold investments in the name of the stay-at-home spouse, so gains are taxed at their lower (often zero) marginal rate. Labor doesn’t just refuse to introduce proper income splitting, it is actively attacking the traditional family unit with higher taxes of a minimum 30 per cent on the non-working spouse’s investment gains. One might almost suspect Labor have something against mums, dads, and self-reliance.
And they certainly have something against small business. While Treasurer Chalmers lectures us about productivity, convenes roundtables, and oversees a whole Productivity Commission, his army of bureaucrats are busy dragging the private sector down to the dismal efficiency levels of the public service. Hundreds of thousands of small businesses will need to restructure out of trusts thanks to another Labor tax change, while many more will waste time and money getting their businesses independently valued at 1 July 2027 for the proposed CGT changes.
Labor’s new CGT tax will also distort capital markets. People, especially those in low tax brackets, will likely preference investments with higher income rather than capital growth; things like listed property, infrastructure, and high dividend paying shares. The higher growth investments, like small and mid-cap companies or international investments, will be less attractive with the new 30 per cent minimum tax. In addition, due to how the tax works, pooled investments such as managed funds/ETFs, become more attractive than direct holdings in shares.
Then there is the rather peculiar treatment of pensioners. Under the proposed rules, those receiving means‑tested benefits – including the Age Pension – may be exempt from the minimum tax in the year they realise a gain. The result is that a retired couple with assets comfortably over $1 million can, with modest planning, avoid the 30 per cent minimum tax – while a young investor with a few thousand dollars in an ETF cannot.
It is not merely inequitable. It is incoherent.
The Age Pension system itself compounds this. A homeowner couple can still qualify for a part pension with assets of under $1.085 million (excluding the family home). That creates a simple incentive: shift wealth into exempt assets, such as the principal residence, and preserve eligibility. A kitchen renovation here, a pool there, perhaps a well‑timed holiday, and the tax system obligingly looks the other way.
What is being proposed is a tax system that breaks the link between income and tax rates – and does so in a way that falls most heavily on those at the bottom. If this is the future of ‘fairness’ in the tax system, it is a curious one: higher effective tax rates for low‑income investors, new incentives to rearrange affairs around pension eligibility, and a tilt away from growth at a time when growth is sorely needed.
The Senate should reject the 30 per cent minimum tax component of Labor’s proposed CGT changes and ensure that people are taxed at no more than their marginal tax rate.
Chris Cornish is an independent financial planner and finance commentator.
This article is opinion only and is not financial advice.
