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What's your point about increased capital gains? Taxing income based on ownership should be higher than income via actual labor. It's insane that's not the case

What's your point about increased capital gains? Taxing income based on ownership should be higher than income via actual labor. It's insane that's not the case in most places.

mianos 4mo ago
If you start a business and grow it from hard work, you will now be taxed more. It's not just passive gains, it's all gain.
- BLKNSLVR 4mo ago
  My understanding is that the difference is in the Capital Gains Tax, which doesn't apply to the day-to-day running of the business or its profitability or the salaries it pays. Again, my understanding is that the (only) difference is when the business is sold, and the 50% discount to CGT is no longer applied and instead there is an inflation adjustment instead (what I don't understand here is how to get an initial valuation, and would it be essentially $0, so the entire amount is capital gains? which feels somewhat unfair) So it will be a hit at the time the business is sold, not at any point during the running of the business. My (potentially naive) take is that the hard work that goes into running and growing a business is about the provision of the goods or services, but if it's about maximising "the exit", then that feels to me like not the kind of incentive that it should be. The 'running' of the business being more important than the selling of it. The 50% CGT discount has set a bad precedent. It should have been lower, or should have scaled over time. It has deformed the expected reward structure. Can a business agree to be sold in tranches over time? If such a thing helps minimise tax then I can see that becoming the norm. I know that selling a house is a big, singular chunk of money that generally needs to be 'managed' in order to pay the minimum amount of tax. Maybe fractional selling is going to become a thing. Wouldn't paying yourself a higher salary (since it's your own business) and/or putting more into superannuation offset the 'retirement' hit of not getting a golden exit parachute?
  - mianos 4mo ago
    [flagged]
  - mianos 4mo ago
    ps. Australia uses a progressive tax system. If you earn very little money, you pay a very low tax rate (or many zero). If you earn a massive corporate salary, you pay the top rate. The new 30% floor completely throws that out the window for capital gains. It means even if your total income for the year is low enough that your normal tax rate should be 16% or 0%, the government steps in and forces a flat 30% tax on the asset sale anyway. So, contrary to what the government is saying, this new regime taxes the poorer even more.
    - BLKNSLVR 4mo ago
      My non-heavily-researched understanding is that people who make their entire, or a majority of, their annual 'earnings' from capital gains may not be all that poor. There's a whole spectrum of examples that can be used to demonstrate fairness or lack of fairness. Can you elaborate on your example of taxing a poor person even more by forcing a flat 30% tax on capital gains? Is this person you? What does your life entail whereby you are poor whilst also living almost entirely off capital gains? You can still get all your capital out before the 1st of July 2027, and then re-distribute into areas that have better tax incentives, like new house builds. Sounds like that might solve two problems at once.
      - mianos 4mo ago
        It's not me. I actually work for a living and I receive a salary. Many people I know with their own business plan to hopefully get out of it some day. They all make less than me but own a business of their own. Let's say this works and those people who already have assets get taxed a bit more, when they are gone, there would then now very little incentive to work hard and start a business. Such short term thinking will pretty much destroy the economy in the long term. You can't tax an economy to health and fairness.
        4mo ago
- runtime_terror 4mo ago
  Capital gains is from selling an assets, if you still own the business you can take as many profits from it as you want. If you're talking about selling the business, then presumably you had years of realizing profits from the actual operation of the business. Now that you sell it, yes, you should be taxed at a higher rate. That said, there are tons of tax loopholes for that scenarios like in the US like a cash balance plan. But let's be honest, we're talking mostly about the sale of assets like stock ownership. That's how the super wealthy accumulate even more wealth. Then combine that with "buy, borrow, die" and you're paying almost no taxes. All most people is for the rich to pay a proportionally fair amount of tax.

What's your point about increased capital gains? Taxing income based on ownership should be higher than income via actual labor. It's insane that's not the case in most places.

mianos 4mo ago

If you start a business and grow it from hard work, you will now be taxed more. It's not just passive gains, it's all gain.

BLKNSLVR 4mo ago
My understanding is that the difference is in the Capital Gains Tax, which doesn't apply to the day-to-day running of the business or its profitability or the salaries it pays. Again, my understanding is that the (only) difference is when the business is sold, and the 50% discount to CGT is no longer applied and instead there is an inflation adjustment instead (what I don't understand here is how to get an initial valuation, and would it be essentially $0, so the entire amount is capital gains? which feels somewhat unfair) So it will be a hit at the time the business is sold, not at any point during the running of the business. My (potentially naive) take is that the hard work that goes into running and growing a business is about the provision of the goods or services, but if it's about maximising "the exit", then that feels to me like not the kind of incentive that it should be. The 'running' of the business being more important than the selling of it. The 50% CGT discount has set a bad precedent. It should have been lower, or should have scaled over time. It has deformed the expected reward structure. Can a business agree to be sold in tranches over time? If such a thing helps minimise tax then I can see that becoming the norm. I know that selling a house is a big, singular chunk of money that generally needs to be 'managed' in order to pay the minimum amount of tax. Maybe fractional selling is going to become a thing. Wouldn't paying yourself a higher salary (since it's your own business) and/or putting more into superannuation offset the 'retirement' hit of not getting a golden exit parachute?
- mianos 4mo ago
  [flagged]
- mianos 4mo ago
  ps. Australia uses a progressive tax system. If you earn very little money, you pay a very low tax rate (or many zero). If you earn a massive corporate salary, you pay the top rate. The new 30% floor completely throws that out the window for capital gains. It means even if your total income for the year is low enough that your normal tax rate should be 16% or 0%, the government steps in and forces a flat 30% tax on the asset sale anyway. So, contrary to what the government is saying, this new regime taxes the poorer even more.
  - BLKNSLVR 4mo ago
    My non-heavily-researched understanding is that people who make their entire, or a majority of, their annual 'earnings' from capital gains may not be all that poor. There's a whole spectrum of examples that can be used to demonstrate fairness or lack of fairness. Can you elaborate on your example of taxing a poor person even more by forcing a flat 30% tax on capital gains? Is this person you? What does your life entail whereby you are poor whilst also living almost entirely off capital gains? You can still get all your capital out before the 1st of July 2027, and then re-distribute into areas that have better tax incentives, like new house builds. Sounds like that might solve two problems at once.
    - mianos 4mo ago
      It's not me. I actually work for a living and I receive a salary. Many people I know with their own business plan to hopefully get out of it some day. They all make less than me but own a business of their own. Let's say this works and those people who already have assets get taxed a bit more, when they are gone, there would then now very little incentive to work hard and start a business. Such short term thinking will pretty much destroy the economy in the long term. You can't tax an economy to health and fairness.
      - 4mo ago
runtime_terror 4mo ago
Capital gains is from selling an assets, if you still own the business you can take as many profits from it as you want. If you're talking about selling the business, then presumably you had years of realizing profits from the actual operation of the business. Now that you sell it, yes, you should be taxed at a higher rate. That said, there are tons of tax loopholes for that scenarios like in the US like a cash balance plan. But let's be honest, we're talking mostly about the sale of assets like stock ownership. That's how the super wealthy accumulate even more wealth. Then combine that with "buy, borrow, die" and you're paying almost no taxes. All most people is for the rich to pay a proportionally fair amount of tax.