"The advice from Australian business could not be clearer. The Federal Budget's capital gains tax proposals as they currently stand will do real damage to business confidence, investment and aspiration and will also significantly damage Australia's reputation as a welcoming centre for international capital," said Innes Willox, Chief Executive of the national employer association, Australian Industry Group.
"The proposals have arisen after a disappointing lack of consultation about their intent, implementation and consequences. The best path would be for the Government to withdraw its proposals, engage in proper and serious discussions with a range of stakeholders and reframe their measures. This is how serious tax reform is done.
"If the Government unwisely chooses to continue down its path regardless of the advice from businesses large and small across the economy, we have offered five simple changes that would make the Government's proposals less harmful to investment.
"While we welcome tax reform, it should always be based on the principles of fairness, simplicity and reducing complexity across the taxation system.
"As they stand, the CGT proposals do the opposite – they will exacerbate rather than improve the structural problems in our tax system.
"We have consulted broadly with our members on how the proposed changes will practically impact on their businesses. They have unanimously reported the changes will chill investment and jobs and reduce our destination as a safe place to invest international capital.
"Many indicate they are now reconsidering planned investments and/or restructuring of their existing arrangements due to uncertainty about future tax obligations.
"We have identified five key areas where the proposed CGT changes will be most harmful to business and investment. If the Parliament intends to adopt an indexation approach to CGT, the Bill must be amended to address these adverse impacts.
"We propose the following five amendments:
- Genuine prospectivity – any new CGT system should apply only to assets acquired from 1 July 2027.
- Symmetrical treatment of gains and losses – capital gains and losses should both be measured on a real (cost-based indexation) basis.
- No minimum CGT rate – a taxpayer should be taxed at their marginal rate irrespective of the source of income, with no minimum rate for capital gains.
- Income averaging – capital gains should be averaged over multiple income years, reflecting the reality of how business income is earned, and consistent with the pre-1999 system indexation system.
- Increase thresholds – the thresholds for the small business CGT concessions should be increased to reflect their lack of indexation for two decades.
"We also point towards the imperative to make corresponding personal and corporate tax reforms. Australia has some of the highest personal and corporate tax rates in the OECD, which greatly reduces our productivity and competitiveness.
"To appropriately rebalance taxes on capital and labour income, any reforms which raise CGT should be accompanied by reductions in income tax. CGT reforms should therefore be revenue neutral, with uplifts returned via personal and corporate income tax relief," Mr Willox said.
