Treasurer Jim Chalmers has been unable to confirm whether Treasury modelled the future impact of the government's changes to capital gains tax (CGT) on individual shareholders and small businesses, instead relying solely on historical data.
In an interview with The Daily Aus, Chalmers repeatedly stressed that the government's approach is grounded in past outcomes, not forecasts of how the changes will shape investment behaviour over the coming decades.
Under Labor's reforms, the 50 per cent CGT discount will be scrapped and replaced with indexation and a minimum 30 per cent tax, a shift expected to leave many investors paying more on the same gain.
Pressed on the policy by Billi FitzSimons, co-founder of The Daily Aus, Chalmers defended the rationale behind the overhaul. The government argues the changes will shift investment away from existing housing and towards shares, which are also captured by the new rules.
Asked whether that meant taxing shares more heavily, the Treasurer stopped short. 'Well, not necessarily higher, it depends on how long people hold the shares, what kind of return they're getting, and what their marginal tax rate is,' Chalmers said.
FitzSimons countered that 'for the vast majority, they will be taxed at a higher rate.' Chalmers replied: 'Well, it remains to be seen. I mean, we can only go on what we've seen so far. What I'm explaining is the modelling, which shows that over the past 20-year period, shares were undercompensated and housing was overcompensated.'
When pressed, Chalmers confirmed no forward projection had been undertaken. 'We can't analyse the next 20 years that haven't happened yet. What we've done is analyse a historical period around when the change is being made,' he said.
The Daily Mail understands a six-page Treasury document outlining CGT 'modelling' was quietly circulated to a small group of journalists on Tuesday. It is yet to be publicly released. Initial reporting on that document suggests Treasury expects only a 'modest increase' in the average effective CGT rate over the next decade.
However, that conclusion rests on a key assumption: that inflation will average 3 per cent a year. That figure sits above the government's own forecasts, which put inflation at around 2.5 per cent on average over the next three years, and at the top of the Reserve Bank's 2 to 3 per cent target band.
The reliance on that higher assumption has raised questions about how heavily the modelling depends on it. Economists say higher inflation assumptions can make the tax changes appear less significant, because a larger share of returns is attributed to inflation rather than real gains, reducing the apparent increase in CGT.
Chalmers maintained the government's approach was evidence-based, while acknowledging its limits. 'We can only go on what we've seen,' he said.
Shadow Treasurer Tim Wilson has criticised the government, saying the government was now in defence mode following backlash to their budget. 'Labor's Budget spin has caught up with them - they ignored the impact of their Budget on small business and are now running a Clayton's consultation now that small business is fighting back,' he said on Wednesday. 'Labor doesn't think about small business, they don't care about small business, and they don't understand small business. All of Labor's broken promises cannot be fixed by spin.'
