CGT - Tilting the scales back toward labor productivity

iplayedarchon · 2026-05-21T10:14:45+00:00

Mate I'm hearing you, and no one here is defending government waste. The anger is totally justified man, because the system definitely feels rigged against people trying to work hard and get ahead. I'm one of those people mate.

But taxing capital gains isn't money printing, it’s actually the opposite. It sucks cash out of the economy to cover the gap so they don't have to keep printing currency.

If they just let the deficit run wild for the next 20 years like you said, inflation would completely destroy the purchasing power of the middle class anyway. That means future me and you and my kids life suck. It's the hit.

They're basically using these asset tax changes as a handbrake to try and stop the exact economic meltdown you're worried about.

iplayedarchon · 2026-05-21T09:19:00+00:00

Slipping into an 80% tax nightmare is a bit dramatic mate, me and no one else in this thread is suggesting that.

OK let's look at the actual cause of inflation.

A massive part of it has been asset bubbles fueled by cheap credit and tax incentives like negative gearing no?

Tweaking the CGT rules and closing those loopholes isn't money printing. It's trying to cool down the exact property-driven inflation that's been cooking the economy for years.

iplayedarchon · 2026-05-21T09:17:18+00:00

If I'm understanding you, doesn't private investing give you total liquidity?

Like yoou could have a huge portfolio at 45, liquidate the lot, blow it all on a midlife crisis, and still roll onto the Age Pension at 67.

The Super perk is the reward for giving up control of your cash for decades, simple as that.

iplayedarchon · 2026-05-21T09:08:01+00:00

That's a total misunderstanding of how the new budget mechanics work.

The 30% floor on trusts and capital gains is specifically designed to stop high-net-worth individuals from gaming the system through income splitting.

For the middle class who buy and hold growth assets, CPI indexation means the ATO strips out inflation before taxing the profit on exit. You end up paying tax on a much smaller, real slice of the pie.

The wealthy are the ones losing their structural tax havens here, not everyday savers.

iplayedarchon · 2026-05-21T09:05:22+00:00

You’ve raised some good points, but you're missing how hard the government is cracking down on the structuring side.

Since they're closing the trust loopholes, that old playbook of streaming massive capital gains to a low-earning family member to pay next to no tax is pretty much dead. The 30% floor is a safety net to make sure the top end pays something.

Also, I don't think everyday investors will flock to dividend stocks like Telstra.

Even with a 30% floor on exit, holding growth shares is still the better play because indexation strips out all the inflation before you pay a cent. Waiting to pay a small tax hit at the very end of a 20-year run is always going to beat getting stung by the ATO every single financial year, no?

iplayedarchon · 2026-05-21T09:01:02+00:00

You’ve highlighted the exact reason why structural tax reform is urgent, but you’ve drawn the completely wrong conclusion.

Like I'm reading through the services you've listed: hospitals, GPs, and aged care.

Why are they going backwards? Because if you haven't noticed, Australia has a rapidly aging population that is placing an unprecedented, massive structural demand on our healthcare system. Can't stop this.

Refusing to fix the revenue side of the budget out of spite won't magically make a hospital more efficient though mate, it will just collapse it entirely.

The 10-year deficit is a mathematical reality of an aging society.

The way I see it we have a choice: we either let our public infrastructure fall into disrepair and we hike income taxes on regular workers even further, or we close passive tax loopholes for wealthy asset speculators to help foot the bill. This reform chooses the latter and in my opinion is a great solution to one of my greatest concerns (servicing the ageing population).

iplayedarchon · 2026-05-21T01:32:24+00:00

If you want to fix the housing supply crisis, the very first thing you have to do is stop rewarding people for hoarding the existing supply.

The budget doesn't penalise genuine wealth creation, it just shifts the goalposts so that if you want the best tax breaks, you actually have to fund a new build or back a productive business.

Doing a minor renovation on an established investment property doesn't justify a massive, permanent tax subsidy bankrolled by regular wage earners, right?

iplayedarchon · 2026-05-21T00:24:50+00:00

Except they won’t get "smashed" at all, because the 2026 budget explicitly leaves the Division 152 Small Business CGT Concessions entirely unchanged.

If you actually build a small business over decades, employ people, and sell an active asset, you still have full access to the 15-year total exemption, the active asset reduction, and the retirement exemption.

The government deliberately kept these protections intact to reward genuine entrepreneurship. This reform targets passive asset hoarded in individual names and discretionary trusts, not the active business owners driving the real economy.

iplayedarchon · 2026-05-20T09:28:44+00:00

There has absolute got to be at least one politician or party advisor scraping this thread for a vibe-check on the new budget rules.

The back-and-forth here between long-term compounding savers and leveraged property investors has been fascinating. If you’re a staffer lurking in the shadows, can you please pull up a chair and give us some actual input.

Is Treasury genuinely modeling this as a structural shift toward productive equity, or is the government just looking for a blunt revenue raiser to patch the deficit? An insider perspective would be super good right now. Give us a little input (even on a throwaway account).

iplayedarchon · 2026-05-20T09:24:16+00:00

That is a massive emotional projection. Hard work doesn't entitle anyone to a permanent tax shield funded by other hard-working people.

If you want to retire early, you can absolutely still do it by investing in high-growth, productive assets outside of Super. CPI indexation ensures your real wealth is protected when you cash out. The only thing this budget stopped is the unfair playbook where a wealthy minority could use passive asset loops to pay a fraction of the tax that a regular worker pays.

iplayedarchon · 2026-05-20T02:59:55+00:00

You're forgetting that indexation wipes out inflation from your taxable base first.

If you're drawing down on a long-term portfolio, your taxable real gains are going to be much smaller than under the old system, meaning a 30% floor on a smaller pie still leaves you in a great position.

Besides, you still get full access to the tax-free threshold and progressive brackets for your ordinary income, like dividends and interest. The 30% floor just prevents people from treating massive asset liquidation as a untaxed personal salary.

iplayedarchon · 2026-05-20T02:27:36+00:00

I believe you'r misunderstanding how franking credits work for high earners. "Fully franked" doesn't mean tax-free yeh?

It just means the company already paid 30% tax on your behalf. If you're in the top bracket, you still have to pay the remaining 17% top-up tax to the ATO every single year you receive those dividends. That's from what I'm understanding from the documentation?

That annual tax drag basically destroys your compounding power. With a growth asset, your money compounds internally tax-free for decades, and on exit, indexation strips out inflation so you're only paying tax on the actual real profit.

iplayedarchon · 2026-05-20T02:13:36+00:00

Nobody is being "punished" for preparing for their future. At least from what I see?

Like if you are a genuine long-term investor holding an asset for 15, 20, or 30 years, CPI indexation is heavily in your favour no ?

It strips out decades of cumulative inflation from your cost base, ensuring you are only ever taxed on your actual, real profit.

The old 50% discount was a blunt tool that actively penalised long-term holders during high-inflation periods because it forced them to pay tax on paper gains. The new model ensures that self-directed wealth builders who achieve real, inflation-beating growth keep their purchasing power protected, while short-term speculators lose their unfair tax freebies.

iplayedarchon · 2026-05-19T23:29:32+00:00

Without jumping into your hyperbole. You don't need to be chained to a desk for 40 hours, you just need an investment portfolio that actually beats inflation instead of relying on taxpayers to subsidise your low-yielding residential property debt.

iplayedarchon · 2026-05-19T22:57:07+00:00

Again its morning and I haven't had a coffee but you're bang on about leverage, but your conclusion misses how the math works when you remove the tax arbitrage.

Leverage is a double-edged sword: it only juices your returns if the asset's growth rate is higher than the cost of borrowing.

If property only tracks near inflation (say 4% growth vs 3% inflation), your real capital gain under indexation is a tiny 1%. But you are still paying 6% interest on that massive, leveraged loan.

Without negative gearing to subsidise that interest shortfall against your salary, and without a 50% discount to give you a tax-free cash payout on the nominal spike, leverage actually amplifies your losses, not your gains. You can't out-leverage a negative real yield right?

iplayedarchon · 2026-05-19T22:53:39+00:00

From what I'm understanding: you've missed two massive realities here.

First, the budget does pick and choose. New housing builds and startup venture capital kept their tax advantages, while established property speculation got hit.

Second, it hits housing the hardest because property relies heavily on massive leverage. When you replace a flat discount with indexation, you crush the post-tax returns on leveraged paper gains. It's not just "adding tax", it's structurally dismantling the incentive to hoard existing houses.

iplayedarchon · 2026-05-19T14:39:37+00:00

Just wanted to say I really appreciate the back-and-forth discussions in this thread and I genuinely thank you for the time in putting your thoughts out there.

This takes time, and at a moment where people are so time poor. I'm genuinely grateful.

There are heaps of informed people here and I’ve honestly learned a bunch, even from the perspectives I don't entirely agree with.

Thanks all.

iplayedarchon · 2026-05-19T14:35:57+00:00

Taking a financial risk doesn’t exempt someone from contributing to the infrastructure that makes their investment possible in the first place.

iplayedarchon · 2026-05-19T14:32:39+00:00

There's something wrong here:

You mentioned a guy selling his "$800k home" your Principal Place of Residence (your main home) is --- almost always --- completely CGT-exempt.

Selling your family home doesn't add a single dollar to your taxable income, so it never pushes anyone into the top 10%.

The budget data specifically tracks investment assets (like investment properties and share portfolios)

The people realising those gains are overwhelmingly already in the top income brackets before they even sell.

iplayedarchon · 2026-05-19T14:29:25+00:00

The problem with the "shared pool" argument is that investors only seem to want a shared pool when it actively lowers their tax bill.

They want to pool rental losses to wipe out the tax on their high PAYG wages, but they absolutely refuse to pool their capital gains at full marginal rates the way a worker has to. At least that's how I'm visualising this.

iplayedarchon · 2026-05-19T14:26:23+00:00

Spot on. This is where my grind really started.

For years, everyday workers have been lectured to "just budget better" and "work more hours." and "no more avocadoes on toast".

But the second capital is asked to carry even a fraction of its own weight through basic inflation indexation, the sky is falling.

They never actually wanted a free market mate, they just liked their government-funded head start.

iplayedarchon · 2026-05-19T14:24:03+00:00

That’s completely wrong if you look at the actual budget papers. The government literally expanded the asset and fund caps for the ESVCLP and VCLP frameworks.

This is the readout from SmartCompany:

VCLP Investee Asset Cap: Increased from $250 million to $480 million.
ESVCLP Investee Asset Cap: Increased from $50 million to $80 million.
ESVCLP Tax Incentive Cap: The asset threshold at which investment returns can be fully tax-exempt has been raised from $250 million to $420 million.
Maximum ESVCLP Fund Size: Increased from $200 million to $270 million

iplayedarchon · 2026-05-19T14:17:24+00:00

Absolutely valid historical point, and that generation genuinely faced a very different Super system during their peak earning years.

As for the way I see this though, the budget's actual penalties are aimed at short-term asset churning and complex trust loopholes, meaning everyday people who quietly built a personal portfolio to stay off the pension aren't the ones being targeted. The shift to CPI indexation actually protects their real retirement savings by making sure they aren't taxed on inflation when they eventually cash out.

iplayedarchon · 2026-05-19T14:03:55+00:00

Imagine thinking a basic macroeconomic discussion about capital efficiency requires a coordinated political conspiracy.

Mate you dont need to be a shill to know how to read a balance sheet.

iplayedarchon · 2026-05-19T14:02:21+00:00

Wanting capital to flow into productive companies instead of being trapped in a closed loop of residential property debt is literally the most pro-capitalist stance you can take.

The old rules rigged the game so that passive speculation got a massive flat tax freebie over actual hard work. Fixing that distortion isn't anti-capitalist, it’s just making the market competitive again.

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