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"Shooting ourselves in the foot" Tax expert fronts Senate Committee into CGT 🏦 · Money News

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  S1: Welcome back to Money News on this Tuesday night. A
• 0:02
  S1: Senate committee has spent the past two days hearing evidence
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  S1: from a range of experts on the government's controversial capital
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  S1: gains tax and negative gearing changes. And today was the
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  S1: final day of hearings. Accounting leaders, fund managers, tech sector
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  S1: and small business advocates, and even the Australian Tax Office
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  S1: were all called to give their views on a bill
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  S1: that has generated fierce backlash since budget night, and the
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  S1: committee is set to hand down its findings later in
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  S1: the week on June 19th. And one of the experts
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  S1: in the room who appeared before the Senate committee today
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  S1: is Tony Greco, senior tax adviser at the Institute of
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  S1: Public Accounts. And he's back on the line for us tonight. Tony,
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  S1: welcome back to Money News.
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  S2: Thanks, Scott, for the opportunity.
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  S1: Tony. Can you just give us an overview of what's
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  S1: taken place over the last few days?
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  S2: Yeah. The bill is in the Senate. And the Senate
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  S2: needs to do an inquiry regarding whether this bill makes
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  S2: sense or not. So this is the two day process.
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  S2: Now it's very much a very truncated process because normally
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  S2: we would get to see the what what the bill
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  S2: is in an exposure draft and it goes through consultation,
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  S2: but that's all been bypassed. So now this is the
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  S2: last check and balance. It's now up to the Senate
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  S2: to recommend to government what it thinks of these changes
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  S2: that were announced on budget night. So that's essentially the process.
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  S2: Who gets invited is up to the government or this committee,
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  S2: I should say the committee. Um so various stakeholders have
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  S2: put their views on on what's been tabled. And there
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  S2: has been a lot of diversity of views, I must admit. Um,
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  S2: but um, yeah, I mean, our position is quite clear. Um, but, uh, yeah,
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  S2: there are differences in opinion.
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  S1: Okay. What can you tell us about your appearance before
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  S1: the committee, Tony? And what was the main message you
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  S1: tried to get across?
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  S2: Well, complexity, um, compliance cost, uh, does this make good sense? Um,
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  S2: and outside of the changes to negative gearing residential property.
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  S2: We don't have too much of an issue with that.
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  S2: We're concerned about the CGT changes for other assets. It
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  S2: just does not make sense to stifle entrepreneurial interests. It's
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  S2: not in our long term interest to do that. We've
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  S2: got a productivity issue. And that's the last thing you
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  S2: want to be doing is disincentivizing people that wake up
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  S2: in the morning and want to basically run a business
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  S2: or innovate or risk capital. It's not in Australia's long
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  S2: term interest. So we really question the policy direction for
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  S2: the CGT changes outside of residential property. Um and there's
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  S2: also some other bits and pieces in that bill. But
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  S2: essentially most people can calculate a capital gain on the
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  S2: back of an envelope. You know what it costs. You
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  S2: know what you got for it. You divide that into
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  S2: or you take half of that and you add that
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  S2: to your income. Now we're going from that to something
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  S2: much more complex. We've got four types of gains, four
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  S2: types of losses. Uh, you have to calculate under the
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  S2: old rules, you have to calculate under the new rules.
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  S2: This will challenge a lot of people. So complexity and
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  S2: then valuations cost a lot of money if you've got
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  S2: liquid assets. Not a problem. You've got ASX. You can
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  S2: get a market valuation at any point in time. Not
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  S2: a not a problem if you've got real estate. Good luck.
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  S2: It can cost you anywhere between $300 $1,000 to get
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  S2: that value. And everyone has to get it valued at
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  S2: the 1st of July 27. So there's going to be
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  S2: a stampede of and this is not just for real estate,
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  S2: it's for unlisted shares or any other asset that someone
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  S2: happens to own. And that's quite a compliance cost. And
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  S2: one of the submissions actually put a number on it.
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  S2: It's quite staggering what the cost to, to the taxpayers
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  S2: will be complying with these laws if they are legislated.
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  S1: MM. In the last month, you've had some of our
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  S1: most successful start up founders and CEOs of some of
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  S1: our biggest companies and large hedge fund managers, all agreeing
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  S1: with what you're saying on this, and you'd have to
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  S1: think that maybe they didn't know to the extent of
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  S1: what has to take place by July 1st or the
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  S1: valuation on July 1st next year. Will the government listen?
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  S2: Well, that's I can't speak for the government. It's loud
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  S2: and clear there. There are issues with parts of this bill.
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  S2: So that's a matter for government. I can't pre-empt what
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  S2: this Senate inquiry will recommend. We'll be waiting for their report.
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  S2: We'll hopefully get an indication of what issues they um
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  S2: they heard as part of this stakeholder engagement. Um, but yeah,
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  S2: that's a matter for government. But the messages are coming
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  S2: in loud and clear.
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  S1: Well, I suppose the question then is, is we can't
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  S1: control the government. What would you like to see.
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  S2: Well, we we would hope that the Senate take account
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  S2: of what many stakeholders have said doesn't make good economic sense,
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  S2: that CGT changes outside of residential property. Um, just do
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  S2: not make. We're shooting ourselves in the foot. We are
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  S2: a high cost jurisdiction. Mhm. We don't want to put
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  S2: more impediments to people starting up a business, doing the
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  S2: hard yards, and not get rewarded for that risk, because
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  S2: the indexation model isn't very pleasant if you've got a gain.
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  S2: It really just relieves you for inflation. But this is
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  S2: capital they're putting at risk. This is their hard earned
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  S2: hours over many years to put something together, uh, which
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  S2: has a high success rate. Like not many businesses survive,
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  S2: not many startups survive. So there's a lot of risk.
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  S2: And I don't think that indexation model will do justice
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  S2: to that, um, to that entrepreneurial effort. And it's not
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  S2: in our interest. That's the main thing. It's not in
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  S2: our interest and the compliance costs are too significant to
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  S2: ignore for the government. So it would be interesting to see.
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  S2: I mean, they are proposing a methodology where you may
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  S2: not have to do a valuation, but we haven't seen it. Um,
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  S2: that's a missing piece. We're going into this process without
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  S2: seeing a lot of detail. And that's really frustrating because,
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  S2: and even if they did come up with some sort
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  S2: of apportionment that, um, uh, to avoid having to value things,
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  S2: people will still want to get invaded to see which,
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  S2: which of the two options produces the best outcome. So
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  S2: it may not actually change anything, but, um, at the moment, uh, most, uh, assets,
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  S2: CGT assets will have to be valued because you're locking
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  S2: in the 50% discount up to that point. So we
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  S2: need a valuation at that point purely because of what
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  S2: is being proposed.
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  S1: Yeah. There's a lot of talk of potential carve outs.
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  S1: And you just mentioned a few that they simply haven't
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  S1: done their due diligence and in my opinion, spoken to industry.
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  S1: But for start ups and small business who can't afford
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  S1: a valuation, you know, they're going to experience an increase
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  S1: in minimum wage in two weeks and payroll superannuation. Changing
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  S1: their cash flow. Huge cash flow challenges. But the treasurer
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  S1: has reinforced this message, saying that he is consulting with
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  S1: those sectors. Do you believe him?
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  S2: Well he is I think he's genuine in that regard.
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  S2: But they're legislating first consult afterwards. That's the wrong way around.
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  S2: It's half baked. I mean, we shouldn't be in this
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  S2: position in the first place. And these things are more
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  S2: than a year out. So what's the rush? What? Why
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  S2: legislate and then start talking to all these. Um and
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  S2: already um there's lots of potential carve outs. So again
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  S2: um if this thing's half baked, it's just doesn't make
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  S2: good economic sense to do it this way. And hopefully
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  S2: that message gets learnt by the government.
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  S1: Just finally, Tony, in the obviously being a senior tax
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  S1: adviser at the Institute of Public Accountants, you would have
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  S1: a lot of people reaching out and a lot of
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  S1: people being concerned. I know in the financial advice industry,
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  S1: there's going to be huge confusion as to what advice
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  S1: can be given without the.
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  S2: Phones are ringing off the hook our members have been
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  S2: receiving since budget night. There's. And there's not a lot
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  S2: of detail we can. Other than the broad parameters of
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  S2: what they're proposing. Um, and the other aspect is there's
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  S2: a lot of misinformation. Thank social media for that. Um, unfortunately, uh,
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  S2: your trusted advisor will make sense of what these changes
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  S2: could potentially mean for a client. So that's what we recommend, uh,
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  S2: clients who are unsure to contact their trusted advisor and
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  S2: let them explain what potentially is, is going to change
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  S2: going forward.
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  S1: It's all fees and it's all money when we don't
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  S1: even have any certainty about what the future may hold.
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  S1: Tony Greco, thank you so much for your time on
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  S1: Money News on this Tuesday night.
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  S2: My pleasure. Scott, thanks for the opportunity.
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  S1: By Tony Greco, senior tax advisor at the Institute of
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  S1: Public Accountants.