Paul Keating has backed Labor’s proposed capital gains tax changes, saying they would not deter entrepreneurs and would help make housing more affordable. He described the reforms as “marginal” and said wealthy investors had enjoyed preferential treatment for decades.
The former prime minister said: “Punters with a big idea won’t be put off by some marginal change to the tax rate. The rush of entrepreneurial blood to the brain always dominates.” He also said: “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’s intervention lands in the middle of a fierce backlash over Labor’s plan to replace the 50% capital gains tax discount with a cost-base indexation model and a minimum 30% tax rate. He blamed John Howard and Peter Costello for introducing the 50% discount in 1999, saying the change helped push house prices from nine times average household income to 16 times average household income. “And that distortion has made housing unaffordable for a whole generation,” he said.
His comments also cut against criticism from some tech founders who say the reforms would damage the startup sector. Keating pointed to companies including Canva as evidence the change would be minor, and said the Liberals had helped “used car selling and dodgy accounting mates”.
Prime Minister Anthony Albanese defended the proposal on Wednesday, saying the government was taxing income 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.”
Treasurer Jim Chalmers said this week the government was continuing to consult the tech sector, even as opposition from founders and Coalition figures sharpened. Tim Wilson told the National Press Club that “the budget represented an abuse of trust” and warned that “Labor would kill the startup sector in Australia”.
The political fight now sits on a familiar fault line: whether the tax system should continue to favour returns from assets over wages, or whether Labor’s australian capital gains tax changes mark a small correction to a long-standing distortion. Keating has made his view plain. The government says the reform is fair. The sector under fire clearly does not agree.
