The Business Council of Australia (BCA) is pleased to provide comment on the proposed Innovative Business CGT Concession (IBCC).
The BCA does not support the overall package of proposed changes to the capital gains tax (CGT) discount or the process through which they have been developed. The BCA set a test that any tax reform needs to increase investment, grow the economic pie and boost living standards, and the Budget tax changes do not meet this test.
Overall, the reforms will reduce investment, reduce productivity, reduce economic growth, and Treasury estimates they will increase rents and reduce housing supply by 35,000 homes. These issues are discussed further in the BCA submission to the Senate Inquiry into the package.
The IBCC is essential because the overall package of CGT changes is inherently flawed. We see merit in an IBCC that is broader and simpler to comply with to better support the policy intent of the changes. This would also be more comparable with regimes in other similar countries, would reduce compliance costs, and could offset some of the detrimental impact of the broader CGT package on investment and innovation. The proposed carve-out is itself an admission and recognition that the overall package of CGT reforms will likely lead to lower investment, productivity and living standards. The qualifying criteria for the IBCC should be streamlined to increase international comparability, reduce compliance costs, and limit the harmful effect of the Budget measures on investment and innovation.