Paul Keating has rubbished claims from the Coalition and the startup sector that Labor’s reforms to capital gains tax will undermine entrepreneurship, insisting the changes are “marginal” and badly needed to improve housing affordability.
Amid a week-long assault on Jim Chalmers’ budget, the former Labor prime minister said wealthy individuals had been the beneficiaries of preferential treatment for investments for decades – rules he said had distorted the tax system and disadvantaged wage earners.
Lashing John Howard and Peter Costello for introducing the 50% capital gains tax discount and dramatically fuelling house prices in Australia, Keating said the Liberals had helped “used car selling and dodgy accounting mates”.
Changes introduced in 1999 had seen house prices increase from nine times the average household income to 16 times’ the income.
“Wealthy people are out there now arguing against the government’s change notwithstanding the stark evidence of the price shock Howard and Costello induced,” Keating said in a blistering statement.
“And they want to split off startup capital and shares as if the individuals commentating have not made a feast of it already. They want to retain a preference for capital over wage and salary income.”
The proposed CGT changes – replacing the 50% tax discount on profits with a new cost-base indexation model, meaning tax on profits after inflation, and a minimum 30% tax rate imposed – have been strongly opposed by some tech founders.
Sign up for the Breaking News Australia emailThe architect of major economic reforms as treasurer in the Hawke government, Keating used tech company Canva to argue healthy valuations for successful startups would leave debate about tax settings as secondary.
“Punters with a big idea won’t be put off by some marginal change to the tax rate. The rush of entrepreneurial blood to the brain always dominates.
“The simple fact is that income is taxed too heavily while capital is taxed too lightly. That is the fact of it – and has been the fact of it.
“And that distortion has made housing unaffordable for a whole generation.”
Keating’s intervention comes as the government struggles with a backlash against the changes. Albanese blamed misinformation and dishonesty on Wednesday.
“What we are doing is taxing more equally the income earned from working, which is how most people overwhelmingly earn their dollars, with income earned from assets,” the prime minister said. “Now that is a reform that is fair.”
Chalmers has stressed the government is continuing to consult the tech sector but has given no firm indication of any change of approach so far.
The shadow treasurer, Tim Wilson, told the National Press Club the budget represented an abuse of trust, warning Labor would kill the startup sector in Australia.
“Where we should have got unity, we had the prime minister stoke fights around the kitchen tables of the nation,” Wilson said.
The opposition leader, Angus Taylor, has pledged to oppose the tax measures in parliament and repeal them if the Coalition wins the next election.
The NSW premier, Chris Minns, criticised the government for failing to return the profits of bracket creep to taxpayers, suggesting high-income earners worked half the week for the taxman.
“We do need to make sure we’re taking urgent action when it comes to personal income taxes, because at the moment a lot of working families are getting stung,” he said.
Labor could try to ram through the budget legislation before the winter parliamentary break in July, avoiding a parliamentary inquiry and the prospect of a well-funded campaign against the measures.
