Albanese Government Targets CGT Discounts, But Australians Want Broader Approach

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With the looming challenge of a $50 billion budget deficit, the Albanese government is seeking to change many tax rules ahead of its planned stage three tax cuts. However, many Australians are looking for a more simple yet sure approach to tax reform across tax systems, not just capital gains tax (CGT) discounts.

Many experts believe the Australian government would tackle the budget deficit head-on by redesigning the stage-three tax cuts and minimising the tax breaks it entails. This opinion is strongly supported by a report published by the Grattan Institute recently.

The report offers several options to help the government lessen the $50 billion projected deficit. 

According to the Grattan Institute, cutting back on spending towards primary defence and transport projects may enable the government to save billions of dollars and alleviate this burden from the taxpayers.

Another option is to revisit the special deal on goods and services tax (GST) currently enjoined by Western Australia. The report discovered that should Western Australia resume paying for goods and services tax, the government may be able to generate around $ billion per year.

Daniel Kave, Head of Tax for Grant Thornton, supports this finding. In an interview, Kave mentioned that should the CGT discount be slashed to 25%, that would generate $5 billion in revenue towards the budget deficit. 

However, Kave noted, “The reality is over the last few years, government expenditure across many governments has outpaced economic growth and the related tax base, so they need to do something about it. This is a small targeted piece of potential reform. My view would be that we need to have a look at wider comprehensive tax reform.”

But other economists, such as the former Reserve Bank of Australia (RBA) governor Bernie Fraser, believe there are different ways to stimulate economic growth. Instead of cutting taxes, Fraser recommends that the government may look into investing more in infrastructure and skills training.

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