r/AusFinance

I was thinking about all of the rage with these CGT changes - and can confirm I am someone who is really, really, really annoyed. This got me thinking as to why?

Then I realised the reason being fundamentally I believe that investment returns should not be taxed at the same rate as wages as there's a significant risk involved with making an investment whether that's buying shares, buying a house, starting a business (and done by money that has already paid tax). Whereas wages is a no risk agreement (editing to say monetary risk as people have validly pointed out health risk at work).

The issue with property investment is that there's a double dip with negative gearing and a CGT discount. I know some people do this with shares as well, once again is something I believe needs to be closed off.

Keen to hear some views from people on this topic - whichever way you lean.

Edit: making really clear as annoyed as I am on this topic this is for a genuine discussion without an agenda 😊

Edit 2: loving the perspectives and discussion everyone 😊😊

Did the maths on how many people will be affected by the changes to the NG policy

• 1 property -> 1623000 or 6.05%
• 2 rental properties -> 423401 or 1.58%
• 3 rental properties -> 129695 or 0.48%
• 4 or more rental properties -> 84984 or 0.32%

Cumulatively this will affect only 8.43% of the population

Australia’s population was 26,821,557 people at 30 September 2023

Note that this doesn't account for grandfathered properties and also that this includes the whole population. The reasonsing for that:

1. Investors are those who have made the decision to invest, and thus they will be affected by this for any future changes
2. The ATO does not make the distinction between adults and minors in their data. It would not be far fetched to assume properties under minors' names for tax planning purposes if you already have several pproperties

Source

ATO Taxation Statistics via AIHW

ABS Population

[ Removed by Reddit on account of violating the content policy. ]

Can memes overturn government policy?

We will soon find out!

For years the conversation has been "tax the wealthy, fix housing, stop letting investors exploit the system." Well, that's exactly what removing the CGT discount does, and suddenly everyone's got an opinion about how terrible it is.

A few things worth understanding:

The CGT discount had to be removed across all asset classes, shares, property, everything. If they'd only targeted property, investors would've just shifted capital into shares and received the same discount on exit. That's not really a reform, that's a game of whack a mole.

The switch to an indexation method isn't punishing ordinary Australians. It's closing a loophole that disproportionately benefited people holding large investment portfolios. Real inflation-adjusted gains still get favourable treatment. It's pure gains above inflation that get taxed more heavily. That's kind of how it should work?

On negative gearing, the deeper issue is that housing stopped being a basic human right and became a business opportunity. The moment that shift happened the entire market reoriented around investor returns rather than housing people. Wages and property prices diverged almost exactly when these incentives were turbocharged and that's not a coincidence.

Nobody's coming for your super or your family home. This is targeting people who've been using the tax system to accumulate wealth at the expense of people just trying to find somewhere to live.

We asked for this. Let's not pretend we didn't.

Tim Wilson used an example of a young entrepreneur who has been attacked by the budget.

That individual is on record multiple times detailing her beginnings, she started the business with $15,000 in life savings and used her parent’s garage, at 11 yrs old. $15,000 at 11.

This example highlights the importance of young families being able to have housing security and how critical it is for advantage to drive opportunities.

She deserves a lot of acknowledgment for being such a great success.

Tim needs to realise most young families don’t have household savings of $15k to put into a business, never mind their 11 yr old and a spare garage that can launch a small business. If we want more success stories, we need better housing security.

Norway sets an example by taxing the profits of their oil and gas sector 78%. This money goes into Norway’s sovereign fund, which funds those types of Scandinavian government services that we can only dream about eg. free universities, cheap childcare while their income tax rate is a flat 22% and they run strong budget surpluses.

In the meantime, the mining industry in Australia pays standard corporate tax of 30%. Yes they also pay mining royalties for what they extract but this is a production cost that is tax deductible.

The Australian Institute has graphed this in a good visual to show the difference.

On top of the demand side pressures on house prices, interest rates, tax policies, immigration, the mining industry restricts the supply side by taking away skilled trades from the housing industry.

I know this will be preaching to the converted for many, but we need to keep talking about this more.

I’m a minor shareholder in my company (through ESOP where options were priced extremely low), and have just recieved a Transfer Notice and phonecall from my CEO explaining that he is selling a large stake (~10% total shares) to a VC (who is apparently a friend of a friend) at considerably lower value than he has stated the company is valued at (in all-hands meetings).

When I asked when details of the sale would be shared with the company, I was asked not to disclose this to anyone as it’s private information for the shareholders, and not relevant to the staff. I think bringing on our largest investor yet is quite relevant, especially as the valuation this sets is pretty pessimistic.

My question is, is it possible to know how much liquidity the CEO himself is taking (as he’s selling it out of his personal holdings, ~75% of total) and how much is being fed back into the company?

One person buys a shit inner subs house, the other buys a nice outer subs house.

Location: Melbourne

Both houses cost 1M today

Which one wins comes 2046?

Please show your work

Let’s say you bought an apartment for 400k. It grew at 2% a year.

You sold it for 538K 15 years later.

When you sell, that means you pay no tax on it at all? No real gains were made?

11 Eastern Road, Rooty Hill — DA approved for 5 townhouses, been listed 685 days. At 80% LTV and 6.5% variable, the vendor has paid roughly $150,000 in interest since listing. Not counting council rates, insurance, or maintenance.

Another one in Penrith — R3 zoned, 419 days, bought in 2021. Around $103K in interest gone.

At what point does that holding cost pressure become the buyer's negotiating leverage? Has anyone here actually used this angle when making an offer?

Keep seeing the mistake being made again and again. The discussion normally goes like this: "The 30% minimum on capital gains tax is great because this is just the same as what a low-income person earning $45k would pay!"

Except this is false. A person earning $45k through work pays 30% *marginal* tax. Their *total* tax % is far less than this.

A zero-income person such as a stay at home parent earning $45k through a capital gain would pay 30% *total* tax despite having the exact same income as the last person.

Edit: A user below crunched the numbers:

"Someone earning $45k wage: Tax is $4288+medicare

Someone earning $45k cap gains (under new proposed min tax, on post 1/7/27 gains): Tax is $13,500+medicare."

So there you have it. An unemployed person/early retiree/stay at home parent/person taking time off work, who sells their shares to make a capital gain, pays over triple the amount of tax that a person earning the same income through work would pay.

Why are we so pissed off about the CGT reforms? I can't be the only 40 year old who things this is a good thing?

It makes it so we can’t use trusts and accounting tricks to drop taxable income to zero while peoples net worth explodes.

If you want a real profit, you can’t just sit on a speculative asset bubble anymore. You have to invest in companies that actually generate real output and cash flow. Thats a good thing no?

Shouldnt we try and stop taxing work at twice the rate of passive wealth accumulation?

My dad thought he was teaching me how to beat the system back with that Rich Dad Poor Dad book. Turns out, the system itself was rigged against anyone who actually works for a living. It’s an unpopular opinion here, but this reform is a long-overdue correction.

The report ranks countries from highest to lowest labour tax wedge. Australia sits below countries like:
Belgium: 52.5%
Germany: 49.3%
France: 47.2%
Sweden: 41.1%
Denmark: 35.8%
UK: 32.4%
Canada: 32.1%

Hi team I am outrageously new to the personal finance world. Which is humiliating seeming I am 31 with a toddler and pregnant. Lucky I have a partner that took on this burden. I have since taken the time to learn personal finance and grow in capacity daily. I appreciate this is a privlidge.

My husband and I are expecting our second baby and we both agree we rushed into it without really crunching numbers. Our biggest out is that we can't afford two kids in daycare if or when they come top side.

Our plan is a) remove any capacity for savings and cut household spending which we can do.

B) I pick up a night job at home which is assessable for me as I'm a social worker and can work for a handful of over the phone crisis lines that are 24/7.

I feel very embarrassed that this has occured and want to know how others manage this situation before? I doubt I can get another job between now and then as my pregnancies debilitate me.