We’re crying out for tax reform, not a raid on wealth before it’s even created
It’s an ominous sign that one of the first items on the government’s agenda after winning a big majority last week is legislating a new tax. So much for the Treasurer’s promise to put productivity at the heart of the Albanese government’s second term.
The tax would apply to unrealised capital gains, something the federal government has never targeted before, setting up a shocking precedent for potential extensions of the tax to unrealised gains. And the nominal threshold would not be indexed, either, ensuring revenues would surge from $300m in the first year to about $7bn a year within a decade, according to recent Parliamentary Budget Office estimates.
The tax would encourage investors to shift more of their savings out of super and into housing, negatively geared or otherwise – making homes even more unaffordable – or perhaps out of the country altogether. New Zealand doesn’t even have a capital gains tax, let alone one on unrealised earnings.
As Tim Wilson wrote this week, the successful passage of this tax would be a “defining moment for our country”, and not a happy one, seeing for the first time the establishment of a bureaucratic machinery in Canberra to measure and enforce a sort of wealth tax. And who wouldn’t be concerned that machinery would be turned to unrealised gains outside superannuation, to feed our increasingly insatiable government sector?
Quite aside from the unfairness of potentially
forcing taxpayers to sell assets to pay tax liabilities for unrealised gains that could easily vanish by the time assets are ultimately sold, it’s a logistical nightmare. Valuing privately held companies or rarely traded land is hard enough let alone the art and antiques often held in super funds, yet the proposed tax would require the valuation of such illiquid assets. Costly legal disputes will ensue.
Wealth taxes, where tried, have been duds. Numerous European countries repealed theirs long ago, including Austria, Denmark, Germany, the Netherlands, Sweden and most recently France in 2018. Norway offers a more recent warning, having lifted its wealth tax to 1.1 per cent in 2022. Even The Guardian reported that 22 taxpaying billionaires left the country that year, more than all such departures combined in the previous 13 years.
Adam Creighton
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Albo is Biden lite - unrealised gain tax (Read 4000 times)
