Interview with Ross Greenwood on Sky News

‍Subjects: Labor’s plan to tax unrealised gains

E&OE………

Ross Greenwood

Now, the legislation for that tax became stuck in the Senate before the election was called. Senator Andrew Bragg from the Liberals was part of the Committee last year that looked into the bill and he ended up writing the Dissenting Report. And I spoke with him a little earlier.

Senator Bragg

I think Australians are starting to understand the real risk that if the Labor Government is returned with The Greens, then you could see an expansion of the unrealised gains concept to other assets, including the family home. And what that means is that people would have to pay taxes on illiquid assets where they haven't got the actual cash.

Ross Greenwood

So we saw in the United States that the Democrats had this sort of an idea under Joe Biden and really they had to walk it back very, very rapidly. Do you get the sense that that would happen here, or is this the thin end of the wedge, what they're trying to do with larger super funds with more than $3 million in them?

Senator Bragg

No, I don't think they can, Ross, because they put it in their Budget. It's banked billions of dollars in the Budget under the revenue item for this new unrealised gains tax. And so that means that if Labor is returned, they will have to do a deal with The Greens to get the revenue. Now, The Greens’ policies are crazy. Their policies are about expanding unrealised gains to other assets, lowering the threshold and the like. And so, this is a real risk to all Australians because this unrealised gains tax concept means that anything is potentially up for grabs.

Ross Greenwood

So we heard yesterday, Geoff Wilson, who's been publicly against this policy, saying that he thinks that a company such as Canva now worth, you know, potentially hundreds of millions of dollars, hundreds of billions of dollars would not have existed if this was in place. Is that the stark reality that it curbs entrepreneurialism in Australia?

Senator Bragg

It will destroy new ideas, it will destroy innovation, because in a lumpy year, you might have a paper gain, but in the next year you might have a paper loss. You're going to pay the tax on the paper gain, but you don't get any refund back on the loss. And that's why taxes are paid on profit, on assets which are realised. And that is a very sound principle of accounting going back many centuries. So, unfortunately for Australia, this is already baked into the Federal Budget. So if Labor is returned, they will have to expand this because they need to actually make good on their rubbery figures in their Budget.

Ross Greenwood

So I'm just trying to get my head around that, because that's one bit that I'd kind of missed and that was that though I might pay tax on gains, non-realised gains this year. What you're saying is if I lose money next year, I don't get the cash back that I've paid to the Tax Office?

Senator Bragg

That's the insanity, Ross, that you would have to pay a tax on a paper gain, but if you made a paper loss, then you're on your own, which is why this is such an insane and risky idea. And frankly, people who have farms or properties or anything else which is illiquid without a cash flow should be very, very worried because the Government will be coming for your money if you make paper gains which may only be illusory or only there for a very short period of time.

Ross Greenwood

So there's one other aspect of this. A lot of things that people invest in, be it startup companies, be it farmland, whatever it might be in their super fund or that they invest in their own right, those things don't generate a lot of cash. So there's not a lot of cash around from income to pay these taxes, if the assets rise in price, and some assets, small start up businesses especially, they rise very rapidly in price, but they might rise too fast for the person's cash ability to pay those taxes?

Senator Bragg

And so many Australians would be able to relate to being asset rich and cash poor. And that is just a natural extension of what would happen here if you had a tax on unrealised gains. So ultimately that's why we're against it, because we think that you only tax on profits where actual gains are made. And the real risk of this election on Saturday is a Labor/Greens Government where the unrealised gains concept will be locked in forever, but it will also be massively expanded to other assets, including the family home.

Ross Greenwood

So got one thing, leaving the family home aside as to whether it gets to that or not, I would doubt that the public would ever go for that. But let's go to the point that if you say, for example, have a small business or a bit of farmland, you just can't sell off a corner of it. You can't sell off sometimes a bit of a small business because there's nothing to sell, there's nobody to buy a little bit of that.

Senator Bragg

Well, you'll be forced to sell the whole asset in totality. And for farmers that are holding their farms in their Self Managed Super Funds, they will be facing the prospect of having to sell a family farm just to pay a tax bill which may only be there because there's an illusory or a short term gain in one particular financial year which has been erased the next year in a drought or a flood.

Ross Greenwood

Just incredible stuff. Senator Andrew Bragg, good to have you on the program today.

Senator Bragg

Thanks, Ross. Thanks very much.

[Ends]

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