The date 20 September 1985 will be forever enshrined in our tax legislation – this is the date that Hawke-Keating government, introduced Capital Gains Tax (CGT). The significance comes from the fact that assets owned prior to this date were carved out and made exempt from CGT. This is otherwise known as grandfathering and is often applied when new laws are introduced so they are applied retrospectively.
The CGT rules were amended by the Howard Government in 1999 to remove the complexity of indexing gains to strip out the effects of inflation. A more simple discount method was introduced that only taxed 50 per cent capital gains, provided the asset was owned for longer than 12 months.
Capital gains tax will be a big issue as we approach the next election. The Coalition has promised to leave it unchanged. However, Labor wants to double it, by reducing the discount from 50 per cent to 25 per cent. The change will only apply to assets from a date as defined in the legislation, in other words, it will be grandfathered. It will not be increased for assets held by superannuation funds or for small business owners
With a better than even chance of a Labor Government, it would appear another important date will be enshrined in our tax legislation. With the rate of CGT due to be doubled, one day we will no doubt appreciate the value of an asset that has been grandfathers from Labor’s changes.
We might not be able to go back to 20 September 1985, but if you are thinking of acquiring investment assets, there is still time to get ahead of the next change!
The information provided should not be considered personal financial advice as it is intended to provide general advice only. The content has been prepared without taking into account your personal objectives, financial situations or needs. You should seek personal financial advice before making any financial or investment decisions.