Keating Defends Australian Capital Gains Tax Changes as Marginal Reform
Paul Keating called australian capital gains tax changes “marginal” this week, defending Labor’s plan to replace the 50% capital gains tax discount with cost-base indexation and a 30% minimum tax rate. He said the reform would not undermine entrepreneurship and argued it is needed to improve housing affordability.
Keating said the rules have long favored capital over wages, leaving wage earners at a disadvantage. For investors, founders and owners of assets, the proposed shift changes how profits are taxed after inflation and lifts the floor on the rate applied to gains.
Keating targets the 50% discount
Keating said the 50% capital gains tax discount introduced in 1999 by John Howard and Peter Costello had helped fuel house prices, which he said rose from nine times the average household income to 16 times the income. He also said wealthy individuals had benefited from preferential treatment for investments for decades.
“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,” Keating said. “And that distortion has made housing unaffordable for a whole generation.”
Albanese and Chalmers defend the plan
Anthony Albanese said on Wednesday that the government was taxing income earned from working more equally with income earned from assets. “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 said. “Now that is a reform that is fair.”
Jim Chalmers has said the government is continuing to consult the tech sector, even as some tech founders strongly oppose the changes. The startup sector has pushed back hard, and Keating responded by pointing to the success of companies including Canva while rejecting claims that the plan would weaken entrepreneurship.
Startup backlash meets tax fairness
Tim Wilson said at the National Press Club that “the budget represented an abuse of trust,” adding another layer of opposition as the government faces backlash over the proposal. The friction is not over whether assets are taxed, but over how far the new rules should go: a cost-base indexation model would tax profits after inflation, while the 30% minimum rate would still leave gains taxed below many ordinary income rates.
That leaves the immediate policy fight centered on two tests: whether the government keeps the proposed structure intact, and whether tech founders succeed in carving out startup capital and shares for separate treatment. For affected investors, the practical change is straightforward — less of the gain would escape tax sheltering, and the final bill would depend on how the new base and minimum rate are written into law.
