Limiting capital gains tax changes to new investments would ‘severely delay’ budget reforms, Deloitte says
Summary
Deloitte says limiting capital gains tax (CGT) changes and stopping negative gearing rules to new investments only would slow needed budget reforms and economic growth in Australia. Including existing investments in the tax changes over three years could raise much more money for the government, which could then be used to cut income taxes for workers.Key Facts
- Deloitte estimates that applying CGT discount cut and negative gearing changes only to new investments would raise $500 million in four years.
- Including all existing investments in the tax changes phased over three years could raise $18.8 billion in four years.
- The extra revenue could pay for a 1% cut in the lowest income tax rate, giving a worker earning $45,000 an extra $500 annually.
- Another option is to increase the tax-free income threshold to $35,000 and set a flat 33% tax rate up to $300,000 income.
- Treasurer Jim Chalmers said any tax changes would include transitional arrangements that respect past investment decisions.
- Deloitte advises allowing a transition period so investors can adjust before the new rules fully apply.
- Deloitte’s report also noted Australia’s budget deficits may be smaller due to higher commodity prices and inflation helping company profits.
- Labor’s reforms to the National Disability Insurance Scheme (NDIS) are expected to save money, but overall budget health depends on how savings are used.
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