u/MikeTheArtist- — reddlx

The CGT reform's indexation defence falls apart for any asset that actually grows. Two charts.

Every time the new CGT rules come up, defenders point to indexation: "It protects you from inflation, that's fairer than the 50% discount."

In theory that sounds reasonable. In practice it only works for assets that barely grew.

Chart 1: Tax bill on capital gains, average wage earner ($100k), Assumes the asset doubled. So a $100k gain comes from a $100k investment that grew to $200k. RBA target inflation (2.5%), new rules from 1 July 2027.

For a typical 5-10 year hold, the new rules add roughly 45-55% more tax at every gain level. You have to hold for ~16.5 years before the new rules stop being a straight tax increase.

For context: the average Australian holds an investment property about 10 years. Retail share holdings turn over faster than that. For the vast majority of real-world holding periods, this is a tax hike.

Chart 2: Same $100k investment, but varying the growth multiple, This is where the indexation defence completely falls apart.

Indexation only shields the inflation portion of the cost base. Over 10 years at 2.5% inflation, that's about $28k off a $100k cost base. If your asset doubled, that's meaningful. If it tripled or more, it becomes a rounding error.

The numbers, top marginal bracket, 10-year hold:

(1) 1.5x growth (slow asset): indexation shields 56% of the gain, new rules slightly better

(2) 2x growth (asset doubled): shields 28%, new rules 44% worse

(3) 3x growth (typical strong ETF decade): shields 14%, new rules 72% worse

(4) 5x growth (good individual stock or property): shields 7%, 86% worse

(5) 10x growth: shields 3%, 94% worse

(6) 20x growth: shields 1.5%, 97% worse

Even at a 20-year hold, high-growth assets still get hammered. A 5x asset is taxed 68% harder. A 10x asset, 86% harder.

The reform doesn't protect long-term investors. It protects mediocre ones. Is this what they mean when they say "no one gets left behind"? Everyone else gets held back?

u/MikeTheArtist- — 24 hours ago

▲ 84 r/fiaustralia

The CGT reform's indexation defence falls apart for any asset that actually grew. Two charts

Every time the new CGT rules come up, defenders point to indexation: "It protects you from inflation, that's fairer than the 50% discount."

In theory that sounds reasonable. In practice it only works for assets that barely grew.

For a typical 5-10 year hold, the new rules add roughly 45-55% more tax at every gain level. You have to hold for ~16.5 years before the new rules stop being a straight tax increase.

Chart 2: Same $100k investment, but varying the growth multiple, This is where the indexation defence completely falls apart.

The numbers, top marginal bracket, 10-year hold:

(1) 1.5x growth (slow asset): indexation shields 56% of the gain, new rules slightly better

(2) 2x growth (asset doubled): shields 28%, new rules 44% worse

(3) 3x growth (typical strong ETF decade): shields 14%, new rules 72% worse

(4) 5x growth (good individual stock or property): shields 7%, 86% worse

(5) 10x growth: shields 3%, 94% worse

(6) 20x growth: shields 1.5%, 97% worse

Even at a 20-year hold, high-growth assets still get hammered. A 5x asset is taxed 68% harder. A 10x asset, 86% harder.

The reform doesn't protect long-term investors. It protects mediocre ones. Is this what they mean when they say "no one gets left behind"? Everyone else gets held back?

If you have any dreams of retiring early or being wealthy, kiss them goodbye, enjoy being a wage slave for life.

u/MikeTheArtist- — 24 hours ago

▲ 14 r/AusFinance

The CGT reform moves Australia from rank 28 to rank 42 out of 43 developed economies. It misses the CEOs and hits everyone else.

The 2026-27 Budget's CGT reform is being sold as closing a generous loophole. The numbers say the opposite.

Top effective CGT rates across 43 developed economies:

0% (often conditional): Singapore, Hong Kong, UAE, Cyprus, Czech Republic, Georgia, Greece, Luxembourg, Malta, Slovakia, Slovenia, Switzerland, Turkey, NZ

Romania 1%, Moldova 6%, Belgium 10%, Bulgaria 10%, Croatia 12%, Hungary 15%, Poland 19%, Ukraine 19.5%, Portugal 19.6%, Lithuania 20%, Japan 20.3%, Estonia 22%, Iceland 22%

Australia (current, 50% discount) 23.5%, rank 28 of 43

UK 24%, Italy 26%, Germany 26.4%, Austria 27.5%, Latvia 28.5%, US (fed + avg state + NIIT) 28.7%, Spain 30%, Sweden 30%, Ireland 33%, Finland 34%, France 34%, Netherlands 36%, Norway 37.8%, Denmark 42%

Before the reform: Australia is rank 28 of 43. Middle of the pack. Below the UK, Germany, the US, and most of Europe.

Under the new rules, indexation with a 30% floor, no discount, a top-bracket investor pays 47% on a real gain.

After the reform: Australia is rank 42 of 43. Second only to Denmark. Harsher than the US, UK, Germany, Japan, and almost all of Europe.

That's a 14-place jump...

You can argue about these numbers in plenty of ways, OECD vs developed nations, indexed vs nominal gains, top marginal vs effective rates, whether to include state level taxes, how to treat the zero rate jurisdictions. Run any reasonable methodology you like. The picture stays the same, Australia moves from the middle of the developed-world distribution to the harsh end. The reform pairs indexation with a 30% floor and no discount, a combination no comparable economy uses at this rate.

However, people abusing the discount to reduce income tax is a real problem, This policy can be made more intelligent. Just one example:

The abuse the bill supposedly targets, CEOs and fund managers converting their salaries into discounted capital gains through vested shares, can be tackled directly.

Treat any shares received as employment compensation as ordinary income, taxed at the marginal rate. Leave the 50% discount in place for ordinary shares, ETFs, and managed funds bought with after-tax savings. That targets the CEOs without punishing the middle income savers who are already locked out of the property market.

If this matters to you, email your senators. They're the ones who actually decide whether this passes.

reddit.com

u/MikeTheArtist- — 2 days ago