CANBERRA, ACT, June 19 -- The Treasurer of Australia issued the following transcript:
Note
Subjects: tax reform, support for small business, the Budget
Kieran Gilbert:
Jim Chalmers, this is quite a backflip, isn't it?
Jim Chalmers:
Not at all. This is the outcome of the consultation that we flagged in the Budget papers themselves. We're putting out this consultation paper on startups, we're making sure that 100percent of the 2.7million active small businesses have got access to the CGT concessions and carve‑outs, we're announcing a whole range of implementation details as we flagged on the night, and so this is consistent with that. It's all about making sure that we can incentivise investment, support small businesses in the ways that we've laid out today.
Gilbert:
Yeah. And you said 98percent of businesses basically exempt now? Is that right?
Chalmers:
The best way to understand it, Kieran, is there are 4 existing concessions and carve‑outs. We're maintaining all 4 of them. But one of them, the most important one, which is around turnover, we are making it much broader and much more generous, lifting that threshold from 2million turnover to 10million turnover. And what that means is every single one of the 2.7million active small businesses, 100percent of them, will have access to concessions and carve‑outs, and 98percent of businesses overall.
Gilbert:
When you look at the complexity of this, though - what it was across the board discount - in hindsight, could you have just reduced the level of discount, rather than this complexity of who's carved out, who's not? Doesn't it create the risk of tax avoidance? If you're setting up a new business, you just set up - if you're getting to a certain threshold, you set up a new business, a small business, and avoid the tax.
Chalmers:
Well, first of all, it's about making it easier for people to buy their first home and to cut income taxes again and again. And having taken that decision to remove the distortion for established housing, which has seen this big decoupling of house prices and wages in our economy. Having taken that decision, the next step is to apply the discount in a fairer and more neutral way, which reflects the actual gains that people are making. So, still a discount, but calculated by inflation as it was before 1999, rather than this arbitrary 50percent figure. And so, we went down that path to apply that CGT discount in a fairer and more neutral way, primarily about housing, but then applied fairly and broadly across the asset base of the economy.
Now, we said on the night, and you would recall this, I think you and I probably spoke about it on the night, that startups are a different case. We're maintaining the intent of the policy, but doing this consultation on startups because we recognise they've got a different cost‑base calculation.
Gilbert:
And so, on that discussion paper, can you give us a sense of what you're going to do? What's the solution to that? Because when you're a startup, you start up with no capital. Every gain, every gain is going to be, you know, it's an entirely different set of circumstances when you start from scratch. How do you deal with that?
Chalmers:
Well, we've recognised that. Not just now, Kieran, we recognised that privately, before the Budget, in the Budget papers themselves and that's been the basis of all of this meaningful and genuine consultation that we've been doing with the startup sector and small business and others. Which is to recognise that the cost‑base calculation is different when startups have got low or no cost base to begin with.
And so, the position that we're putting in this consultation paper, which is out this morning, is about recognising that, applying a different kind of discount, a 50percent discount, subject to some pretty strict criteria around how old the business is, how much it's turning over, how long the shares are held for. But it's all about making sure that we're encouraging, rather than discouraging, investment in the startup sector, a really important dynamic part of our economy. And so, making these implementation details clear and consulting on them in the interests of investors and founders and also people who are engaged in these employee share schemes.
Gilbert:
Yeah, and I know we like to use the term backflip or compromise - however you want to describe it, it's a compromise. You've been listening to those concerns, and one really clear one to me looks like you're very much listening to the claim of a death tax. You don't want any sense of a death tax being imposed, with that discretionary testamentary trust to be exempt as well.
Chalmers:
Look, there are absolutely no inheritance taxes or taxes on inherited assets in the Budget. That was clear already but we're making it even clearer. We're putting that matter beyond any doubt so that all types of discretionary testamentary trusts continue to be exempt from the minimum, subject to some integrity measures that we will consult on. That trust legislation comes in a little bit later in the year. It's not in this primary legislation before the parliament right now. But where we can provide a bit more clarity and a bit more certainty on some of the issues that have been raised with us, then we are seeking to do that.
But we're maintaining the intent of the policy that we announced in the Budget. We flagged then that we'd do a bunch of consultation. It's not actually unusual, in fact, it's standard. It would be unusual if we weren't consulting on a tax‑reform package which is this broad and this ambitious. Other governments of other political persuasions have done that. So, when big tax reform happens in this country, there's consultation on implementation details, which we're engaged in. We're announcing some of the outcomes of that today. There are multiple pieces of legislation, which you'll see in this instance as well. All of that is standard operating procedure for tax reform in this country.
Gilbert:
There was - I'll let you go. I know you've got another commitment to get to, but in terms of the intensity of the backlash here, you said it was your most ambitious, certainly the most controversial budget, this fifth Budget. The intensity of this backlash, were you surprised by it? Did you expect it? And is this - will this nullify it now?
Chalmers:
No, I wasn't. I wasn't surprised, Kieran, and I'll tell you why. Economic reform in this country is always contested, it's always contentious, and particularly when it comes to tax reform, but it's worth it. It's worth it because it's about making it easier for people to buy their first home, and cutting income taxes for workers again and again, and better aligning the tax treatment of labour and asset income - these are really important objectives. And it would have been easier for us politically to leave everything as it is. But that would have consigned more and more generations to this broken status quo in the housing market and in the tax system and it would have locked even more Australians, and particularly young Australians, out of housing.
And so, we have chosen the hard road of reform and not the path of least political resistance, that is certainly the case. And in doing so, you expect there to be people who will say and do anything - they'll go to the wall to defend the current arrangements in some instances. And so, there's nothing about these scare campaigns, nothing about this opposition, which is especially surprising to us. We're persevering regardless, because this is really important for the country.
Gilbert:
I just finally, I think it's a bit unfair wearing the maroon tie with your boss today, with the Prime Minister. I'll put that to one side. And thank you for your time today. Appreciate it.
Chalmers:
Appreciate it, Kieran. All the best.
Gilbert:
Jim Chalmers there, a proud Maroon fan and Broncos fan, and rubbing it in the nose of all of us Blues today.
Disclaimer: Curated by HT Syndication.
