Keating backs CGT reforms, says Howard changes made house prices "blast off"

Former Prime Minister Paul Keating has stepped into the debate on changes to the Capital Gains Tax (CGT) announced in last week’s budget with a full-throated defence of the Government’s proposals.

In a statement to media outlets, Mr Keating noted that he was the Treasurer who introduced capital gains tax in 1985 because “the takeover merchants were taking over industrial companies, closing down the businesses, selling off the assets, taking the profits free of any taxation”.

He noted that when the CGT was introduced the gains were taxed “at the same tax rates that employees paid on ordinary incomes though importantly, washing the inflation from the calculation – taxing only the ‘real’ gain.”

However, in 1999 John Howard and Peter Costello, whom Mr Keating calls “a couple of smarties” who “thought they could do their used car selling and dodgy accounting mates a favour by jacking a 50% discount on to the taxation of capital profits.”

He attached the following graph to his statement to show “how housing prices took off dramatically from the moment Howard and Costello introduced the 50% discount in 1999. And not just took off blasted off.”

Mr Keating also addressed some of the fear campaigns being run by conservatives – especially those about small businesses and start-ups being adversely affected.

Mr Keating noted that “if a tech startup fires, like a Canva, the value acceleration and level of wealth makes any discussion of the tax rate absolutely secondary. If it doesn’t fire, the CGT or its discount is of no help to it.”

Mr Keating suggested that “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.”

His support of the changes will be welcomed by the government which is having to combat false suggestions such as those circulated on social media that capital gains will be taxed at 47%. Given Keating is the father of taxing capital gains in Australia had he suggested the changes were damaging Jim Chamers would have been dealt a severe body blow.

Instead, the former Treasurer and Prime Minister has echoed the current Treasurer’s lines and given him strong support.

Mr Keating concluded by noting, “the point is, 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”.

Read Paul Keating’s full statement here.