@ArrowTrades Great example. It's hard to believe this is anything other than them having no idea what they have just done. Maybe as it dawns on people they walk all of it back to just houses to save themselves? Otherwise, am I being hyperbolic to say it's going to kill the ASX?

Anyone looked at the draft legislation?

(https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7493)

It looks like the 30% tax at the Trust level has gone? The minimum 30% is still there, but on the beneficiary as normal (with some caveats).

I'm I am reading this wrong?

I think what you're reading @reddogaustin is just the first of two tranches of legislation. Its a bit of a headscratcher but from what I understand the govt wants to put out some legislation that establishes "the vibe" of the thing and pass that through in the next month or so. They will then follow up later in the year with specific legislation that will include Trusts, specific carve outs for startups and the like. So, no, I don't think Discretionary Trusts are out of the gunsights just yet.

Thanks @Noddy74 and a sadface for sure.

Makes sense to do 2x tranches. Distract and delay.

I'll keeping monitoring and developing the plan forward for my personal circumstance.

@Solvetheriddle I agree with a lot of that. Just on your final comment:

“one thing I am doing is selling my shares with large gains while the 50% discount is in place; these are shares I don't think I am a long-term holder of. So a clean out and focusing on the ones I intend to keep for many years. That's the plan anyway”

My understanding is all capital gains up until July 2027 will be taxed on the 50% discount. It will only be gains after that where the inflation based discount applies. It shouldn’t impact capital gains tax on shares you’ve held a long time, unless you expect them to shoot the lights out post June 2027. That’s my understanding.

It’s not good for young people in my opinion, only those who haven’t bought their first house yet. I think it will help here. Outside of owning your own home (one that’s as expensive as you can afford) and super, the tax regime for wealth creation through investing in assets is now less incentivised for all Australians. The risk/reward is now lower.

@Rick yes, Rick, you are right. That means a two-tiered system going forward. very complicated, maybe a job for AI to track that, lol. i will still try to concentrate my portfolio, in reality, that impacts about 5-10% of the portfolio, then hold these. Maybe I should have done this before.

Well done on CDA BTW, every time I see that ticker i think go, Rick lol, all the best

As a new investor, I've been watching the lead-up and response to the CGT changes with interest. It seems most business people and experienced investors are shocked and dismayed by the bluntness of the final CGT changes.

We thought (hoped?) they were going to redirect investment away from property and towards productive businesses. Instead, they've allowed growth businesses and pre-revenue startups in Australia to get caught by the same blunt instrument. So I've been wondering, why didn't people see it coming, and what does Labor really think it is doing?

My working theory is that business people over-estimate the level of business insight and intuition that government has (both politicians and bureaucrats). They then react to stupid laws by saying 'they are clearly out to get you'. While the left do see 'rich people' as an easy target for tax money, I don't think they are trying to disadvantage all young Australian businesses, RnD and exploration. They just don't really understand how investing dollars get to growth businesses.

Happy for pushback, it's just the vibe I get. Half of the population vote for either side of government, and they are not all dumb (take your pick which side I'm referring to). I'm proposing that we have to forgive them like Jesus, because 'they don't know what they are doing'.

What to do about it: So, maybe for those of you with any reach, just keep making the case patiently and clearly, and I'm suggesting you assume zero knowledge on the part of the people who's mind we are trying to change. Start with first principles and demonstrate why investing in productive business and RnD and exploration in Australia is good for the eventual tax base, and employment, and the prosperity and skillsets of the population.

You'll run into plenty of retarded communistic arguments, but there's no point in responding angrily, because otherwise you just look like angry meany 'capitalists'.

Also if I'm reading they story right, they really did just reduce the available pool of investing dollars for startups and medical research in Australia, and you have to go pretty far out on the left before you start feeling that's a good thing. So maybe they just need to have that laid out in plain English. Maybe they just don't get it...yet....

Also if distributing from a trust to a bucket company the trust pays the minimum 30% on distribution and the bucket company must still pay it's tax rate as well. Pretty much made bucket companies useless (corporate beneficiaries) so a double taxing

Assuming the article I read was correct..

@lastever i think your thinking is right. When I was at Treasury, i wanted to work in Tax policy, but I think you needed to do a thesis on tax in your economics honours year, and that wasn't me. Anyway, happy with where i went, but i have had an interest in tax policy ever since. But these guys are good and understand tax policy and theory, its all they do.

The two constraints on policy are: 1. is it practical to implement? it may make great sense, but cannot be easily implemented. So we have easy implementation policies that don't make great economic sense, payroll taxes, over-reliance on income tax, etc. The second is, of course, the political aspect. The Government makes the final say, and tinkers with policy, so you get self sesrving carve outs etc, that's where the damage is done. The Government asks what I can get away with and who I cut adrift. The election cycle is a main driver, as well as budget requirements (big spending is always hungry for money). So it's back solved.

The point is that the big nation-building decisions take insight, a long-term view and political courage, quite rare.

@Schwerms i think you are right. i think it's maybe the death of trusts, by the looks of it. ok, nothing i can do about that. But I want capital gains relief in any new structure, which is my big concern; my trust is pretty basic. As things stand i lose my tax-free threshold, so i have to change the structure. I can imagine those with businesses, complex illiquid assets and multiple beneficiaries having more issues than I.

 I think what you are saying has a lot of merit. Very few of the government politicians have run a business. And the bureaucrats are just bureaucrats, made worse by the career trajectory of the vast majority of them being just university to government. 

One of the most damaging parts of the budget was the removal of the 50% CGT discounts for investments over 12 months. It will definitely change how I invest from higher risk investments to more reliable dividend paying stocks. I am only a shiny-arse stock investor, what about people starting real business with everything on the line?  

The level of financial ignorance of the government was demonstrated last year when they attempted to tax unrealised capital gains in super funds. Just an anathema to everything business, taxation and how life works (or should work outside of communism).  

Lots of intellectual arguments you can run against the above. However the impact of disincentivising investment is not immediate and will take years to be felt. And what Australia desperately needs is investment in productive businesses.  

Hey @Rick and @Solvetheriddle, I think @Solvetheriddle's original take is correct. There is a grace period up until 1 Jul 27, but after that ALL CGT will be indexed and none will receive 50% discount. There won't be 2 tiers ongoing. So, if you're sitting on any short-term large capital gains, it may be sensible to sell before 1 Jul 27. The only grandfathering that is occurring is for the pre-1985 assets, where previously no CGT will apply upon sale, CGT will now be calculated ONLY from 1 Jul 27.

I ran that past my accountant today and she agreed. But tell me if you have had advice otherwise.

It won't help for share investors, but from a housing perspective I'm pretty sure the primary residence exemptions will still apply, which are quite liberal. You don't even have to live in a property for it to be a primary residence as long as it meets a few other conditions. When I sold my last property, I was truly amazed how lenient the partial exemption rules are even if you've used it as a rental property in certain instances.

Theres a short 3:17min video on the ATO website that blew my mind. (6 Year rule). Using your home for rental or business | Australian Taxation Office

I'm sorry to say that you may need a new accountant @DrPete if that is their advice!! But yes, all the different permutations make it quite complicated.

https://budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf

https://www.stockspot.com.au/cgt-calculator/ You can play around with the dates using this calculator to see the impacts. Provided you have a valuation at 30th June, the new rules are applied to implicit gains from that date on unsold assets.

It might create some funky decisions for holders of illiquid small-cap ASX stocks come June 2027!

Just to add to that slightly @Dangles - the next part of that factsheet spells out the different ways you can estimate the value of the asset as at 1 Jul 2027. The effect of the snip below is that you can choose to use the actual valuation (easy for shares) OR you can prorate the growth over the entire holding period and apportion the old method and the new method proportionally based on the % of time held pre- and post-1 Jul 2027. I imagine its likely you'll want to calculate both and use whatever gives the better outcome. Sharesight's roadmap just got a rejig.

Yeah, that's clearly the case @Dangles - the 50% discount is grandfathered through to July 1st 2027, and applies after that date for all gains made up to that date, with the new CGT indexation only applying to gains made on the same asset after that date, so two different calculations to make on eventual asset disposal or whenever a CGT event relating to that asset takes place. It's right there in the Budget factsheet provided by the government so there shouldn't be any doubt at all about that.

I don't mind it, but most of my gains are going to be made within my fully tax-free income stream account now that I'm in pension phase rather than accumlation phase, so it doesn't bother me personally, but as with all tax changes, it will have an impact on investment behaviour from this point on, and it's hard to predict all of the outcomes that flow from that, but it's going to be interesting to see how investment behaviour changes and how that flows through to asset prices, particularly in sharemarkets with how growth stocks get valued vs predominantly income stocks. Obviously the best stocks provide both, but most don't.

I was having a look at Woolworths yesterday comparing it to when I last owned it on a decent pullback when their then-CEO, Brad Banducci, made a few slip-ups, including in front of a federal senate committee, and the WOW SP dropped and I had a short but profitable trade, and they're only just above that level now. There are a number of supposed "safe" income stocks that have done much the same, provided some income but have gone nowhere in terms of real-money capital gains.

The reason why LICs used to be so popular back when WAM Funds went from one (WAM Capital) to 4 or 5 LICs and often traded at double digit premiums to NTA was primarily because people were prepared to pay a premium for reliable income generators. Interest rates impact that of course, because if the "risk-free rate" (term deposits or cash in the bank earning interest) is high enough, there's little incentive to chase higher yields when there's clearly greater risk of capital loss.

Anyway, I think there's one possible outcome here where income generators who are perceived to be reasonably "safe" (i.e. won't go broke) may start trading at premiums once again, or higher premiums if they already do, including LICs, and I really thought LICs had already had their day and were mostly sliding into irrelevance - in recent years. May happen. May not. But I think at the very least we should see less rediculous premiums built into "growth stock" share prices compared to the last few years (prior to this year when many supposed "growth stocks" have been sold down).

Could be good for banks. Could be bad for SaaS which is already having a rough time of it. Could also be bad for materials, i.e. mining stocks, although I tend to think those move more in line with the price movements of the commodities that they produce. Should be interesting, and we may not see too much change before around this time next year.

Hmmm, yes @Dangles it may be time! It’s very new news but a strong accountant should be on top. In all seriousness she, and her team, have clearly been increasingly overloaded over the last couple of years. The level of proactivity has fallen to almost zero.

A question for the community, how much proactivity do you get from your accountant? To what degree do they simply process tax compliance issues, or do they proactively prompt you with advice, warn of risks, etc?

And can anyone recommend a strong accountant who doesn’t seem overwhelmed with work?

That’s a fascinating point @lastever. You’re right, there is an incentive to juice prices to maximise the amount captured under the 50% discount. For sure we’re going to see some of that for micro caps. Better put some time aside on 30 June! ;)

As an aside if anyone is planning to continue holding an investment property after 01/07/27, make you sure you get a “generous “ valuation done before then to use as your reference to apply the 50% cgt to otherwise the gummint will use their own method which won’t be as generous.

Consequently a greater proportion of any future appreciation in value will be taxed under the new system, resulting in a larger tax burden

If the recent history in NZ is anything to go by, and we fall into the same trap after our negative gearing is introduced, I'm not sure if a generous house price valuation will be needed (unless you have a much longer term horizon). If prices were to fall away over time like in NZ, the new rules would mean that there should still be inflation in the system that will help offset future gains.

There will be a crazy amount of property investors trying to get a valuation done for mid 2027.

@DrPete I definitely can't recommend an accountant at the moment, and am probably on the hunt for a new one myself. I literally today got the paperwork to sign for last financial years tax returns and he's charged me double this year for the 'privilege'. I've been patient because I know they were drowning, it is only going to get worse from here. The only ones winning (financially at least) from this budget (other than the thieving government) is the accountants.

It feels like there may be more advantage now to setting up a company to hold investments. Flat 30% company tax rate allows improved tax deferral for high wage earners, with franking credits and dividend flexibility.

I apologise to any accountants, I’ve probably missed something.

So, is there going to be a selling wave leading up to July 2027?

Personally, I have been somewhat on edge, to put it mildly. I committed to working 0.25 FTE for 2026 and then fully retiring at the end of the year.

The assumptions that went into that decision were primarily based on the sale of assets - predominantly residential real estate - that could have been very badly messed up if the cgt tax changes were effective immediately.

Looking forward, I agree that income assets may well become a better option for anything held outside of super. Longevity risk notwithstanding.

Who knows if any of this will change the dire housing affordability issue.

Just me or there seems to be a lack of detail?

• Linked to inflation. Will this be the CPI published number or an ATO number? Is it compound or simply added?
• What about the bracket creep effect? Make a big gain and you can't spread it over the past years low tax brackets. I believe this was part of the reason for the 50% discount.
• Does the 30% minimum apply to super? If so a big change!
• Instead of negative gearing can you add the loss to your cost base?
• Can you still negatively gear shares? Is debt recycling still an option?

I find it funny the government frames this as trying to help the younger generation. It actually means they will be taxed more than the older generations if they want to invest the same way those before them did, further increasing the divide they seem to want to fix.

@Dominator yes the devil will be in the detail for some of these things. Accountants and financial advisors will be another beneficiary of the budget!

I can answer a few of your queries to the best of my understanding. Thus is a good summary that cover’s most of this https://apple.news/ABj_S1GJsRVGO6M0QRfPzWQ

Super

No, the 30% minimum will not apply to an SMSF under $3 million. I believe it will remain at a flat 10%. For a pension stream account I believe it will be zero? I stand to be corrected. For SMSF’s over $3 million I believe all income will be taxed at 30% including capital gains.

Negative gearing

Yes you can carry forward losses on rental property above the income from that property to either offset property income or capital gain in future years. New builds will be eligible for the 50% discount (or the new 30% rate after inflation) and negative gearing to boost new home builds.

I don’t know about negative gearing on share or debt recycling. Will be keen to find out.

Wealth creation

I agree with you. This is going to hit anyone who has already purchase a home. My daughter and her family have purchased their home and now trying to create some wealth for the future via investments. They have a discretionary family trust because my daughter works and my son in law looks after the family. That arrangement wont work so well now. They take a risk to invest in company shares. With 30% minimum tax on capital gains and higher interest rates, will it be worth the risk. Would you build a new home with the risk older Australians could dump their rental property bringing down house prices?

where do I see the cash going? Superfunds up to $3 million converting to a pension account, then no tax in retirement. I believe this also includes CGT. SMSF’s are about the only safe haven I can see at the moment. For younger people the benefits are a long way into the future, and will the rules change by then?

Outside of super, medium growth with high fully franked dividend stocks. Growth stocks can be risky, this just made them a whole lot riskier when the government wants a share of you risk profits!

Yet again the focus is on dragging those who have “got ahead unfairly” down rather than lifting up and providing support to those who needed it. The budget is mostly just an increase in tax to fund previous and new poor spending, we continue to have growing deficits despite this increase in tax as the government spending as a % of GDP sets new records outside of short term crises (Covid).

The increase of tax on capital gains was needed from an overly generous 50% discount, the transition arrangements seem reasonable (in general) allowing time to adjust despite the fact they are effectively retrospective. The 30% flat rate on capital gains and trusts is a good alignment to company tax rates, but I don’t see an ability to average over 5 years which will hurt less wealthy who cash in a once in a lifetime capital windfall as opposed to those who basically live off capital gains (the very wealthy). I am also concerned about start up tax concessional impacts which are very reliant on favourable capital gains treatments to help offset the very high risk of loss.

The big miss is the lack of indexing income tax rates or reducing them to offset the additional tax expected from the changes – which makes this some what a tax increase rather than a structural change in tax.

With further detail I will have to review how I manage my investing going forward, but I still see long term capital growth as having a significant advantage over income or short term capital gains due to the compounding being done pre tax.

Regarding your comments and the above question from @Dominatoron negative gearing for share investing, there's a great clip on instagram (yes sorry) from Glen James, handle is: 'moneypodcast.aus' where he asks Jim Chalmers on that exact topic.

Jim responds with that this is solely focused on Property, noting that about 98% of negative gearing is done through property so they are prmarily targetting that.

I'm trying to read this for what it dis/incentives: The news are focused on property, where it incentives burying your capital in your family home, or investing in new builds. For share investing, it reduces the incentive for long term investing, and encourages short term speculation. Might as well take profits now, since the enormous risk of investing over the long term now has reduced return opportunity.

But what about business incentive that none of news are talking about at all: Again, the long term risk of trying to build a business just saw a reduction in upside potential.

Am I reading it right?

@Tom73 not sure if I intepreted your comment correctly but to clarify I think it's not a 30% flat CGT rate, it's a minimum of 30% (and then marginal above that).

Excellent points all around.

Look, as a group we are probably more keenly impacted by these changes. But it is really interesting, and heartening, to note that no one is especially critical of the need to tax and fund essential government services. Nor is there any great partisanship apparent. None of the perspectives are narrowly anti tax, or anti Labor or pushing any particular ideological barrow.

Rather, it is about what is fair. The second and third order consequences. And how it fits within a broader policy discussion and the incentives it creates. And, in the main, i agree with most of the points made.

I certainly think the changes are unnecessarily punitive and wont illicit the impacts the Government thinks they will, at least not in the manner they might hope. Especially in terms of inter-generational inequality. And it always sticks in my craw that capital gains are framed as "unearned income", or only relevant to the very rich, and of less importance than labour. Both capital and labour are critical to any well functioning economy, and the media's tendancy to try and frame it as a class war is myopic, short sighted and ignorant of how things work. It's just annoying.

As a country we are being taxed more than ever and we still cant cover our costs, with deficits and distortions as far as the eye can see. It just seems like everything is designed with the goal of getting re-elected in the near term rather than our country's long term prosperity. "What's in it for me?" is all most people seem to care about.

It's depressing. Although, as i need to remind myself often, it could be a lot worse and there aren't many places that i'd rather live. I just wish we could do better.

I will definitely be having a chat to the accountant to consider what structural changes might be needed to handle this (accountants have to love this budget), but other than that nothing released last night will change what i invest in or how i invest. At least not to any material degree.

As a country we are being taxed more than ever and we still cant cover our costs

Unfortunately, my cynical take is that this is really about increasing government revenue – and you really only need look at where government spending is for evidence that they need more money. It feels a lot like the ladder is being pulled up on people building wealth. A 30% minimum CGT rate that is ostensibly about income splitting but will do things like pick up 20 something year old teachers or nurses with modest investments doesn't seem to be about intergenerational equity. The thing I am concerned about is the direction of travel. There is clearly a desire by the government to increase the tax base to fund ballooning spending.

I believe the best way to invest going forward will be through a company structure. If you are active enough you can reduce the company tax rate to 25%.

It will probably take a bit of time for these changes reverberate through the smaller/growth end of the market.

Agree with your analysis on this budget cynically increasing tax hauls while claiming 'intergenerational fairness', but the 30% minimum CGT rate is probably one of the more reasonable changes of the whole budget imo.

How many 20-something year old teachers and nurses are earning under $45k these days? Barely any I would guess. A new nurse graduate salary starts at $68k according to Gemini. This change should mainly target boomers who retire onto a tax-free super pension and then sell down their investment properties or personal share portfolios to realise cap gains on a much lower effective tax rate.

How many 20-something year old teachers and nurses are earning under $45k these days? Barely any I would guess. A new nurse graduate salary starts at $68k according to Gemini.

Yes, but the effective tax rate of the grad nurse on $68k is ~15%. It doesn't seem like an equitable scenario that they would be paying double their effective tax rate on any cap gains (under the existing system they would be paying 15% CGT). We are obviously talking about very modest amounts but I read somewhere that 40% of Zoomers have invested in ETFs. Which is a great stat.

@lastever agree around impact for business builders who exit (same as my issued with start-up equity rules), I think we need more detail, there are often concessions for business owners in these situations and we need to see how they change, but this also goes to my concern that averaging hasn't been mentioned.

Regarding the 30% flat rate, I did realise that this was a minimum rate so higher marginal rates will likely kick in, but I still think it's a good anti avoidance step around abuse of tax free thresholds and rates used by companies and now trusts. Again there is a cavate that it is applied practically and with low complexity, which may be a bridge too far.

As a country we are being taxed more than ever and we still cant cover our costs, you nailed it @Strawman and I would add that you can't say this fixes intergenerational wealth when it continues to build the debt that future generations will have to pay (in taxes or inflation).

I do wonder how much impact the reduction of negative gearing will have on property. It can still be accumulated to offset against future income/capital gain so it's more a matter of timing rather than the quantum.

Few points:

• If property investors require the negative gearing to stay afloat in this tax year, then they're, IMO, flying too close to the sun and don't have the margin of safety.

• The capital gain made from property is likely to push individuals over the 30% minimal rate so that I don't see that moving the dial. If it doesn't then you should seriously consider what investments you're making.

• Given negative gearing with shares is still ok, what is stopping someone from lending capital to their own company, the company purchasing the property, the company paying their corporate tax rate, and then the company ultimately giving tax credited dividends to it's shareholders? all this would do is make higher regulatory requirements and higher costs, more asic fees, more time taken. Talk about productivity....

More red tape, more fees paid to middlemen, hurdles, and in the scheme of things, not really enough costs to make any substantial difference to a savvy investor.

If you are fortunate to have residency in another country another option to avoid the CG rules is to move and claim tax residency in another country.

You can then, after some time, sell whatever assets in Australia and then pay tax on capital gains to the country where you claim residency (if required)

And because you declared to the tax office you are no longer living in Australia, then you don't need to file a tax return with those transactions otherwise it is double taxation.

I wish I did that when I worked in the UK. I never thought the CGT rules in the UK were so relaxed. Apparently if you are under a certain threshold in overall income (think it is 100K? can't remember) and capital gains or your return does not change much from the previous years, you don't need to file a tax return to the UK revenue and customs.

I still remember the day when UK revenue and customs sending me a letter telling me NOT to do a tax return when my last return didn't show anything unusual!

If you are fortunate to have residency in another country another option to avoid the CG rules is to move and claim tax residency in another country.

You can then, after some time, sell whatever assets in Australia and then pay tax on capital gains to the country where you claim residency (if required)

And because you declared to the tax office you are no longer living in Australia, then you don't need to file a tax return with those transactions otherwise it is double taxation.

The ATO considers changing tax residency to be a CGT event.

You may not have to leave the country for tax reasons @edgescape if Angus has his way and the changes are repealed as he outlined in his budget reply speech.

Also we finally have tax indexation on the table for the mainstream political parties. Governments may have to start respecting the purchasing power of their tax revenues like the rest of us and not rely on it creeping up with inflation. Hell they may even start thinking about the productivity of how they spend it rather than rely on the rest of the economy to drive productivity.

And another revolutionary idea for mainstream politics from Angus: having some measurable link between immigration levels and the capacity to house those coming into the country!

What ever your views on the policies, it is good that we now have some clear distinctions on what is being offered rather than each doubling down on the others stupid ideas…

NZ is starting to look very attractive, especially if you have a good idea or start up, that one day you may want to sell or list on the NZX...

I’ve been giving some more thought to the impact of CGT post June 2027 under different CPI scenarios and house price increases. My understanding is the CPI discount will be compounded in the formula.

Assuming house prices double every 10 years and CPI settles at an average 2.7% over the next 10 years (target), then the inflationary discount for a house that doubles in value (from $1 million to 2 million) would be $316,116. Under old rules the discount would have been $500,000). This is a likely scenario in future.

If the CPI is higher and house price rises are slower, this gap narrows. If CPI increases to 4% then the discount would be $490,000 on a house that increases in value from $1 million to $2 million, compared to $500,000 on the old rules. So while the CGT is likely to be higher, as CPI approaches 4%, and with capital asset growth of 7% (doubling every 10 years), the gap narrows. If house price rises slow (likely) the gap will narrow. The other thing to consider is CGT will be taxed at a minimum 30% rate, not at marginal rates as it currently is. Currently you can time capital asset sales to years your income is lower. This strategy will now be less useful.

@UlladullaDave I had a managed fund back in Australia during that time which had CG on it when i was in living in the uk. But I did file tax return for leaving which included that fund and shares I sold to fund the trip and only thing i had were orcl shares (it was running at a loss at that time due to dot com bust and it was already reduced the year before the bubble burst).

Anyway I filed more returns afterwards because of the managed fund tax statements and ATO said there was no tax owing on the account for each of the years i was away before they told me not to do any more. Also the capital gains was tiny on the fund and never breached the uk capital gain threshold.

So I am speaking about the CG tax from this perspective. But you highlighted something i didn't know purely because I tidied up most of my financial affairs before leaving with my accountant that time.

Anyways I sold my orcl shares at a gain few years back so the ATO got the money in the end albeit at 50 percent CG discount.

The CG tax change is going to hit all sorts of places that people haven't considered yet. I still haven't read the actual budget papers so won't write much here until I have, but I reckon it's going to have a meaningful impact on ETFs, particularly when they are having to rebalance.

I imagine it is much to optimistic of me to think that we can just sit tight and wait for all these changes to be repealed when these muppets get voted out.

The more we find out the worse these Budget changes become, I have gone from accepting of problems to achieve improved balance on tax to just plan angry about what is either total incompetence or just plain economic terrorism.

We now have confirmation that capital losses will not be indexed (Labor’s CGT changes_ Experts warn new t...tors with diversified share portfolios.pdf). I had assumed they would be, which makes sense for diversified investments, but was waiting for confirmation. The Treasury models used to show the impacts of the tax changes implicitly index losses because they look at the overall average capital gain (index results) to calculate outcomes, which anyone who has ever invested in anything knows includes some losses.

But NO, losses will not be indexed, which results in even higher average tax rates to investing in startups, small caps or anything vaguely risky when compared to say index investing or investing in housing (ie single asset investing). You are disadvantaged by having a diversified portfolio – ie by managing your risk you pay more tax.

It is exceptionally hard for innovative businesses to raise capital in this country (x10 for Biotechs), most give up and go overseas because Australian investors are risk adverse preferring to invest in mining and housing. We now have another drag on incentives to invest long term and in risky innovation which requires diversification, which leads to higher average tax. Where is our improved productivity and increase in wealth going to come from?

The result is you pay a higher average tax rate per $ of gain if:

·        You invest in higher risks companies

·        Diversifying your investments

·        Your business has a higher ROIC

·        You’re a startup creating value from virtually nothing or opportunity cost

The CGT changes make sense for real estate investing, but it’s absolute stupidity to use what was general public support for that to apply it to investing in and running businesses. Someone lend Jim a calculator please.

We are the Lucky but Stupid country.

Rant over! 

But NO, losses will not be indexed, which results in even higher average tax rates to investing in startups, small caps or anything vaguely risky when compared to say index investing or investing in housing (ie single asset investing). You are disadvantaged by having a diversified portfolio – ie by managing your risk you pay more tax.

If the gain excludes inflation, then the loss should also exclude inflation which is why losses can't be indexed. I understand the logic behind that. But, unfortunately it seems like the government has just put a bunch of talking points out in public without really understanding the consequences, or that the investment landscape in 2026 is nothing like what it was in 1985 when indexation first came into existence.

If you take a portfolio approach to investing, which in small caps is vital from a risk management perspective, then you will be overtaxed on gains because only the cost base associated with the gain will be indexed. It will push the tax rate up well into the 40% range. Which begs the question or why bother?

Yes somehow we need to stop investing in the housing market. I agree with what the Government is trying to do.. Housing should not be a privilege it is a human necessity..

But the small business and innovation needs to be fostered as well.

I have done a calculation for BHP: $68,000 Profit before tax..

Buy: BHP Group shares in March quarter 2016

Summary table

Item

Value

Purchase price

$30,000

Sale price

$98,000

Purchase CPI (Mar 2016)

108.2

Sale CPI (Dec 2025)

145.39

Indexation factor

1.3437

Indexed cost base

$40,311

Indexed capital gain

[Real gain = Sale price - Indexed cost base]

$57,689 = 98,000 - 40,311

Then use you're taxable income to work out the final amount you pay to the ATO

50% rule proposed to expire in 2027

2/ Discounted Capital gains tax 50% CGT on the $68000 profit .Just halve the profit 34,000 = 68000 /2

So tax paying share holder is worse off with proposed budget idea by $23,689 vs the CGT 50% Rule

And the 50% rule uses the $68000 vs Index method will use the Sale price $98000

Fill the pots holes!!

My further rant on the CGT, and why we shouldn't even have one, particularly on property is that it only makes sense if you are taking the funds out of the 'market' or spending it on consumption.

With property, if a house has gone up by X amount, odds are all of the other property has gone up by a similar amount. Worse than that, is that if you have depreciated the building your cost base is also reduced further increasing your 'capital gain'. So if you are looking to reinvest in another property, your real purchasing power has decreased by the CGT amount, the Real Estate agents and conveyancing costs, and the stamp duty of your next property (additional tax). Effectively you'd only be able to reinvest in cheaper and cheaper properties, erasing your capital as you go, particularly when rents don't go near to covering interest, rates, land tax, repairs, insurance the list continues. Well, you might ask, why would you need to sell your property to buy a different one. An example is massively increasing taxes, ask anyone with a holiday house in Victoria, or the council arbitrarily changes the bylaws saying your suburb can no longer provide a house for short term leasing or can only do so for a greatly reduced number of days a year.

Shares are not as bad in most cases unless you are buying like for like, but on a share that is running up in value, say Amazon in its heyday, you could sell on one day, lose almost 50% of your 'gain', and not be able to buy the same number of shares (proportion of the company) the very next day. Meaningfully reducing your 'wealth'.

The only really appropriate, 'wealth tax', should be on consumption. Anything taken out to be spent should be taxed, anything reinvested should not be. We are not a serious country and are governed by Clowns (apologies to actual Clowns, some of which actually have talent). Rant over.