Tuesday, 23 February 2016
Questions without Notice
My question is to the Prime Minister. Prime Minister, why is halving the general capital gains tax discount a terrible thing but halving the capital gains tax discount for millions of superannuation accounts a good idea?
I thank the honourable member for his question. I refer him to the answers I gave yesterday, to which he responded with a further question, about the impact of halving the capital gains tax discount for individuals.
As we know, that would mean that an individual who was paying capital gains tax at the top marginal rate—and that may not be someone who is habitually in the top marginal rate, but because the gain is large enough to push them there for the purpose of the gain they may very well be paying it even though their normal income is lower than that—would have that tax rate pushed up to 37 per cent.
Now, I ask the honourable member to reflect on this: the increase in property prices—
has been in the order, over the whole decade, of about seven per cent. Of course, it has gone up—there were big years like last year and there will be flatter years; I will come to those in a minute. But what that would mean is that a person who had an asset that had grown at six or seven per cent over a period of years—five, six, seven, eight, nine or 10 years—under the Labor Party's proposal would be paying a substantial amount of tax on the real gain. I gave the example yesterday of somebody who had held an asset for six—
The previous Labor Party policy on capital gains tax which, of course, was introduced by Paul Keating, was to index capital gains for inflation so that the real gain—the real after-inflation gain—was always taxed at the marginal rate. What Labor is proposing here is a radical change that will provide an extraordinary disincentive to investment. We know that they have a fixation on property and that they want to drive down property prices—we understand that. But what they are proposing would apply to every asset: a new farming enterprise, a new technology enterprise, a cafe or a business—anything you like would be smashed by this dramatically-highest-in-the-comparable-world capital gains tax.
Ms Owens interjecting—
I just want to leave honourable members with this reflection: in this very vulnerable property market, where prices are forecast in some cities to decline and in others to increase by maybe one or two per cent, in that moment they are proposing the biggest shock to the most important asset for all Australian families.
Mr Mitchell interjecting—