Paul Keating backs CGT overhaul as marginal change

paul keating has backed Labor's proposed capital gains tax changes, calling the plan "marginal" and saying it is needed to improve housing affordability. He also rejected claims that the reforms would undermine entrepreneurship, placing him squarely behind the government's tax fight.

The former Labor prime minister said the changes were aimed at a system that has favoured capital over wages for decades. He argued wealthy individuals had benefited from preferential treatment on investments, while wage earners were left at a disadvantage.

Keating on capital gains tax

Keating's intervention came as the government faces opposition from some tech founders and the Coalition over the proposal. The changes would replace the 50% capital gains tax discount on profits with a cost-base indexation model and a minimum 30% tax rate, according to the government's plan.

In a statement, Keating said, "Wealthy people are out there now arguing against the government’s change notwithstanding the stark evidence of the price shock Howard and Costello induced". He added: "And they want to split off startup capital and shares as if the individuals commentating have not made a feast of it already. They want to retain a preference for capital over wage and salary income."

Howard, Costello and 1999

Keating also lashed John Howard and Peter Costello for introducing the 50% capital gains tax discount. He said the effect of the 1999 changes was visible in housing, with house prices rising from nine times the average household income to 16 times the income.

He described the settings bluntly in another statement: "The simple fact is that income is taxed too heavily while capital is taxed too lightly. That is the fact of it – and has been the fact of it." He followed that with: "And that distortion has made housing unaffordable for a whole generation."

Albanese and Chalmers

Anthony Albanese defended the government's approach on Wednesday, saying: "What we are doing is taxing more equally the income earned from working, which is how most people overwhelmingly earn their dollars, with income earned from assets," He added: "Now that is a reform that is fair."

Jim Chalmers has said the government is continuing to consult the tech sector, while Tim Wilson told the National Press Club that "the budget represented an abuse of trust". Wilson also said, "Where we should have got unity, we had the prime minister stoke fights around the kitchen tables of the nation".

For readers in the startup sector, the dispute now centers on whether the proposed tax mix changes the cost of backing new companies or simply resets the balance between income from work and income from assets. Keating's support gives Labor a former prime minister arguing the reforms go too far only in the opposite direction: not far enough to fix housing pressures.