Former prime minister Paul Keating has accused investors criticising the capital gains tax overhaul of pure greed, leaping to Treasurer Jim Chalmers’ defence as NSW Premier Chris Minns admonished his federal allies for failing to provide bigger income tax cuts.
Minns’ call to let workers keep more of what they earn came on top of his refusal to endorse Chalmers’ changes to the CGT discount after questions on whether they would crimp investment and hurt the economy.
The NSW premier, who clashed with Prime Minister Anthony Albanese last week over funding for Victorian Premier Jacinta Allan’s contentious Suburban Rail Loop, said the CGT reforms were “not my changes”.
Younger shareholders and experienced venture capitalists have revolted against Labor’s “intergenerational equality” budget, which Chalmers and Albanese have said was designed to boost investment and productivity.
Keating, a mentor of Chalmers who first created the CGT, sought to shift the debate, saying investors wanted to exempt start-up 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,” he said in a written statement.
Keating argued that John Howard and Peter Costello did a favour to “their used-car-selling and dodgy accounting mates” by creating a 50 per cent flat CGT discount, which the former prime minister argued had caused Australian house prices to become nearly the most expensive in the world. UNSW economist Richard Holden has questioned the link between the CGT change and price growth.
“A society that fails to house its children is a society in decline – this is what Jim Chalmers and his prime minister are seeking to arrest,” Keating said.
“Yet when Jim Chalmers announces a policy principle to restore the equity of taxing capital profits on a basis of equality with the taxation of income – we hear the howls for continuing preference.”
In response to investors’ claims that money would shift to places like Singapore and New Zealand which don’t have a capital gains tax, Keating 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.”
Keating’s defence of Chalmers came a week after the treasurer, who wrote his PhD on Keating’s pro-market reforms, restored the CGT discount to a model similar to the one Keating created before Howard’s changes.
Critics say it was correct to scrap negative gearing and the CGT discount on housing. But they worry that by extending the changes to all assets, young entrepreneurs taking big risks would lose out and older people who invest in blue-chip shares would win.
Another talking point out of last week’s federal budget, billed as Labor’s most ambitious, was the government’s decision to offer a permanent $250 tax offset known as the Working Australian’s Tax Offset. Opposition Leader Angus Taylor followed up by pledging a structural change to income tax that would index the thresholds to inflation, permanently handing back bracket creep. Chalmers rejected indexation, and suggested Labor would continue to use the offset to provide relief.
Minns lent weight to the campaign for indexing proposed by Taylor. Keating and his union ally, Labor doyen Bill Kelty, have previously called for the top marginal rate of 47 per cent to be cut because, as Keating has said, the internationally high rate was “confiscatory”. So has independent MP Allegra Spender.
Minns told reporters: “The top marginal rate is 47 per cent. As I said in parliament last week, you work Monday, Tuesday, and half Wednesday for yourself and then Wednesday, Thursday, and Friday for the government, that’s a tough burden.”
“I know budgets are under pressure but, in a general sense, whether it’s now or in the future, we do need to make sure we’re taking urgent action when it comes to personal income taxes.”
Taylor seized on Minns’ comments on the tax contest, which has created an ideological tussle over aspiration that is set to dominate political debate before the next election.
“Even state premiers can see what Anthony Albanese will not admit,” he said.
The Victorian labor government did not buy in, saying only in a statement: “We are currently assessing the implications for businesses in Victoria.”
In Melbourne, Chalmers pushed back against Minns by noting that marginal tax rates did not operate in the way Minns had suggested.
“One of the problems with our tax system right now is it’s out of whack. It doesn’t reward work sufficiently, which is why we’re cutting taxes five times in three different ways,” he said.
“We’re taking some difficult decisions to fix that.”
Chalmers signalled some CGT changes for the start-up sector. These changes are unlikely to satisfy a growing host of critics including independent MP Allegra Spender and former Labor adviser Lachlan Harris who worry the new inflation-measured discount will chill investment and hurt many business people, not just startup founders.
Keating introduced the CGT in 1985 as part of a broad tax package that included deep cuts to personal and company tax cuts plus the creation of the fringe benefits tax. The Coalition then, led by John Howard, vowed to axe the tax at the 1987 election.
In 1999, then-Liberal treasurer Peter Costello overhauled the CGT, replacing the inflation-indexation system with a flat 50 per cent discount on all nominal capital gains. It was expected to boost investment into the share market, but critics argue that it instead drove a near 25-year surge in house prices.
Shadow treasurer Tim Wilson used a National Press Club speech to hail what he called a “truly organic” social media campaign which has poked fun at Labor’s CGT changes. He described Albanese as “the guy in that group assignment that does none of the work, but still wants the grade”.
“Where we should have got unity, we had the prime minister stoking fights around kitchen tables of the nation, pitting children against their parents, grandchildren against their grandparents,” Wilson said.
“It is a budget so absent of ambition for our nation that its failure is shown up in its own numbers.”
Chalmers blasted Wilson, describing his speech as “the least coherent, least credible shadow treasurer hit-out after a budget that anyone can remember.
“Tim Wilson’s misinformation and his lies didn’t last 30 minutes of scrutiny,” Chalmers said. “First of all, their policy is for bigger deficits and more debt and more inflation”.
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Paul Sakkal is Chief Political Correspondent. He previously covered Victorian politics and won a Walkley award and the 2025 Press Gallery Journalist of the Year. Contact him securely on Signal @paulsakkal.14.Connect via X or email.
Shane Wright is a senior economics correspondent for The Sydney Morning Herald and The Age.Connect via X or email.From our partners
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