Capital Gains Tax (Capital Exit Tax)

We believe that revenue raised in a manner that distorts or inhibits employment, business or investment activity should be taxed differently so that such distortion is reduced.

The appreciation of assets is legitimate and worthwhile and it is our view that a person should not have to pay tax on an investment created with money that has already been taxed.

In many cases long term capital gains are only a reflection of the change in money supply (inflation). People who are lucky or astute should not have to be levied with what amounts to being a substitute for death duties.

We propose the introduction of a small capital exit tax of between 0.5% & 0.7% on the sale of all property and shares regardless of profitability and time held. This would be a much simpler solution and would raise a similar amount of revenue as that generated by the current system.

There will not always be boom conditions in either the share market or the property market. Current between $15-$17 billion is being raised under the existing arrangements. Similar revenue can be gained through the above proposal.

Table: Capital gains tax forecasts (cash basis)

Estimates Projections
2007-08
$b
2008-09
$b
2009-10
$b
2010-11
$b
2011-12
$b
Capital gains tax receipts 17.4 15.7 14.2 15.4 17.0
Revisions since 2007 PEFO -0.9 -3.8 -6.6 -3.6 na
Source: Treasury estimates