Horse trading with The Greens, who hold the balance of power on the crossbench, will see the government’s controversial capital gains tax (CGT) changes pass in the Senate to become law.
The Greens struck the deal with minor changes to the tax bill in exchange for the Labor government agreeing to extend a parliamentary inquiry into other Budget’s other measures to amend the National Disability Insurance Scheme (NDIS).
Most notably for the startup sector, which has fought against the tax changes, which remove the 50% CGT discount, in favour of inflation-adjusted capital gains for personal income tax when shares are sold, the deal strips Treasurer Jim Chalmers of the discretion to add any new asset classes to the startup discount carve-outs announced last week.
The main target for The Greens was property investors. The party secured amendments to block a loophole that would have allowed people to use Self-Managed Super Funds to buy investment properties at a tax discount.
Last Thursday, 24 hrs before a rushed Senate inquiry into the CGT and other tax changes handed down its 112-page report, with the Labor-led committee supporting the legislation, the government announced a consultation paper on carve-outs under the “innovative business CGT concession”. That preserves the 50% discount on startup share sales for founders and employees with sweat equity.
But those changes have several eligibility qualifications: the shares must be new equity issued after June 30, 2027, by an unlisted and independent company; must be issued while the startup has annual turnover of less than $50m and has been operating for less than 10 years; and the shares must be held for a minimum of five years.
Responses to the proposals are open until July 10.
Greens senator Nick McKim, who was part of the snap Senate inquiry, which received a staggering 395 submissions, in spite of its short window, and , quoting Eucalyptus founder Tim Doyle, who advocated strongly to support employee share schemes in the carve-out, said the reforms “are a small step in the right direction” but Labor lacked ambition to address housing costs
“The changes we have secured means that there will be fewer wealthy property investors turning up to auctions and outbidding renters who want to buy their first home,” McKim said.
“Labor’s decision to lock in $33 billion in tax handouts means 1.7 million properties will remain in the hands of property investors, not first homebuyers, and leave renters to continue fighting the housing crisis for longer.”
Another , which will cut spending by removing 160,000 people from the scheme, now has another 8 weeks before tabling its final report on August 14, following parliament’s winter break.
The Greens are lobbying for the NDIS Bill to be withdrawn. The tax bills will gain Senate approval in the next fortnight.
