Our socialist government is turning Australia into a low-growth, high-yield defensive sidenote. By Roger Montgomery in The Australian.
The Albanese government has delivered the most aggressive restructuring of wealth incentives this country has seen in a generation. …
Growth and innovation:
High-income earners and fund managers will look at a high-growth tech stock or a mid-cap disrupter and realise the tax drag on their eventual exit is now significantly higher. Why take on the binary risk of capital growth when the government takes a much larger bite of any upside, which, by the way, isn’t guaranteed? Reliable, franked dividend yields instantly become the path of least resistance.
That might sound OK at first, but it pours petrol on the problem of the ASX’s historic underperformance compared to the US. Australia’s dividend imputation system has long incentivised companies to return profits to shareholders to pass on franking credits, rather than retaining those profits to fund R&D or global scaling. By making capital growth even less tax-effective for individuals, this budget doubles down on Australia’s structural bias. It essentially tells the market to stop trying to build the next global tech or medical giant, and instead allocate capital right back into banks, miners, and legacy infrastructure. It entrenches the ASX as a low-growth, high-yield defensive sidenote. …
Housing:
Because existing properties are grandfathered, current investors will simply refuse to sell. Selling means giving up a precious, and now extinct, tax shelter, while facing a harsher CGT regime on whatever asset they buy next. Transaction volumes on established homes will dry up, choking market liquidity. …
The result? With fewer private landlords buying established rentals and a massive influx of new residents, rents will skyrocket. The ironic, tragic third-order effect is that the young people this policy claims to assist will be utterly crushed in the rental market long before they can ever save enough for a home deposit.
Wasting time restructuring because tax law changed:
Elsewhere, the introduction of a 30 per cent minimum tax on discretionary trust income directly attacks how small-to-medium enterprises and family business groups manage risk, succession, and working capital. Consequently, tens of thousands of family businesses will spend the next two years seeking valuations, burning time, focus, and capital engaging in otherwise needless restructuring.
This is effectively a tax on productivity. When business owners and investors are forced to focus on tax compliance rather than growing, innovating, or hiring, the economy stalls. …
Talent walks:
It’s sad that Australia has always struggled to keep its brightest entrepreneurs from fleeing to Silicon Valley, Turkey or Singapore. And those who have already left, are now even less likely to return. Other countries will be the beneficiaries of the new businesses they create. That’s because the simple fact is the combination of high personal income tax rates and a penalised capital gains structure destroys the incentive to build a business locally.
Albanese and (almost?) the entire Labor parliamentary team have no experience in private industry or building a business. Their lived experience is of negotiating a share of the money taken from taxpayers by coercion, or a wage paid by an employer who takes the risk of business failure.