New CGT Changes are Brutal - Negative Gearing on Shares still Available?
As per budget paper (quote below), there will be a minimum 30% tax on capital gains after being indexed. Only capital gains up to July 2027 will be given the 50% discount.
Well there goes that strategy of holding CG assets until retirement lol. Unless you can claim the pension (so that means you max out your PPOR?)
Also, I only saw a mention of killing negative gearing for established houses. I assume this means you can still debt recycle and claim negative gearing on shares?, still available as pointed out below.
>Commercial property and other asset classes, such as shares, will remain subject to existing arrangements
That makes super all the more important given you'll probably want to max out the transfer balance cap in the transition to retirement. Concessional contributions will be gold.
>Introducing a 30 per cent minimum tax on real capital gains
>The Government is also introducing a 30 per cent minimum tax on real capital gains income earned from 1 July 2027. The minimum tax will reduce incentives to defer the sale of assets to periods when other income and marginal tax rates are low. This will support a more consistent taxation of lifetime income by aligning the tax rate on real capital gains with the marginal tax rate faced by the average worker on incomes from $45,000 to $135,000.
>Income support recipients, including pensioners, will be exempt from the minimum tax, ensuring people with low income and low wealth are not disadvantaged. The capital gains of people who are already subject to at least the 30 per cent marginal rate on their non-capital gains income will not be affected by the minimum tax. The 30 per cent minimum is aligned with the minimum tax being introduced on discretionary trusts.
>The minimum tax rate reduces the benefits of timing the realisation of capital gains to minimise tax paid. This ensures that affected taxpayers are subject to a tax rate that is closer to the marginal rate they faced during their working life. If applied in 2022–23, over 95 per cent of net capital gains income would have been earned by people who are either not affected by the minimum tax or who had a marginal tax rate of more than 30 per cent during their working lives. In 2022–23, about 70 per cent of salary and wage earners faced a marginal rate of 30 per cent or higher.
>The minimum tax on real capital gains also mitigates against potential lock-in effects that can result in prolonged holding of assets to reduce tax. The minimum tax reduces incentives for investors to delay selling assets to when they have lower marginal tax rates, for example at retirement, improving the allocation of resources across the economy and supporting productivity growth.