He argued that the new model only results in better treatment of inflation-adjusted losses if they can be offset against real gains.<\/p>\n
\u201cThe pre-1999 rules prevented this, as they allowed only nominal losses to be offset against capital gains,\u201d Mr Francis said.<\/p>\n
\u201cOver time, about 30 per cent to 40 per cent of shares in companies listed on the ASX return capital gains below inflation and the real losses these generate cannot be offset against those stocks that do achieve real gains.\u201d<\/p>\n
He said the \u201creal effective tax rate\u201d \u2013 which is the total paid after deductions, offsets and inflation are factored in \u2013 could average around 50 per cent higher than the taxpayers\u2019 marginal rates.<\/p>\n
\u201cThough in some cases could be even higher,\u201d Mr Francis said.<\/p>\n
He stressed that for a worker on the 39 per cent tax rate, the real effective rate on the capital gains could average around 60 per cent.<\/p>\n
The former treasury staffer also railed against modelling in the budget papers used to explain the change.<\/p>\n
![\"Farmers](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/05\/af865a283c65a37efe4adfe815855d58.jpeg\")
<\/p>\n
The budget papers said that the 50 per cent discount had failed to properly reward investors compared to an inflation-adjusted model.<\/p>\n
Mr Francis argued this was flawed as it assumes an investor buys a single stock that matches the ASX index performance and beats inflation.<\/p>\n
\u201cIn the real-world, investors typically hold a portfolio of shares, with a distribution of capital gains, some higher than inflation, some lower than inflation (where indexation only partially protects against tax), and some negative returns where indexation is useless,\u201d he said.<\/p>\n
The former treasury official compared this to an investor who split $10,000 equally into Australia\u2019s four major banks two decades ago.<\/p>\n
\u201cAfter adjusting for 73 per cent inflation over the period, the investment would have provided a pre-tax real capital gain of $1250, or about 1.2 per cent per year above inflation,\u201d Mr Francis wrote.<\/p>\n
\u201cHowever, of the four banks, only one, CBA, has provided a capital gain above the inflation rate. The others have significantly underperformed inflation.<\/p>\n
\u201cAfter moving to inflation indexing, at a 39 per cent tax rate, the tax payable on the total gain is $1850, or nearly 150 per cent above the total real return!\u201d<\/p>\n
A treasury spokesperson said the government was not changing how losses are calculated.<\/p>\n
\u201cUnder indexation, an investor does not have a capital loss if their gain is positive but less than inflation,\u201d the spokesperson said in a statement.<\/p>\n
\u201cHowever, they will no longer pay any tax on a gain in this situation, where they do currently under the 50 per cent discount.<\/p>\n
\u201cTax paid across a portfolio of assets depends on a range of factors including rates of return, inflation and holding period.<\/p>\n
\u201cComparing indexation to the 50 per cent discount for the four bank stocks selected by Mr Francis, under indexation around 2 per cent more tax would have been paid if the stocks were bought in March 2006 and sold 20 years later.<\/p>\n
\u201cHowever, if these stocks were purchased in March 2016, 2 per cent less would have been paid.\u201d<\/p>\n
Mr Francis\u2019 warning comes after Treasurer Jim Chalmers revealed plans on budget night to impose the new CGT system from July 2027.<\/p>\n
He also revealed plans to roll back negative gearing, only applying it to newly built homes and properties purchased before the budget speech was delivered.<\/p>\n","protected":false},"excerpt":{"rendered":"Australian investors could pay up to 60 per cent tax on shares, a former treasury official warned in…\n","protected":false},"author":2,"featured_media":687336,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,44703,44704,44705,164,331058,10928,13998],"class_list":["post-687335","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-capital-gains-tax","tag-cgt","tag-cgt-discount","tag-economy","tag-geoff-francis","tag-negative-gearing","tag-treasury"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/687335","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=687335"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/687335\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/687336"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=687335"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=687335"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=687335"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}