During an appearance on ABC Insiders on Sunday, host David Speers pressed Mr Chalmers on one of the most controversial changes in the budget: the removal of the capital gains tax (CGT) discount, not just for investment properties, but for all assets.

“Why are you also changing the capital gains tax rules for non-property investments?” Mr Speers asked.

“Because we’re taking one of the big distortions out of the market,” Mr Chalmers replied.

He said since the Howard and Costello government had made the “really big mistake” of introducing the CGT discount in 1999, it had “introduced this massive distortion in the way Australians invest in our economy”.

Established housing was “overcompensated” by capital flows and shares were “under-compensated,” causing shares to become “relatively less attractive” over time.

“So by taking that distortion out of the system it is a fairer, more neutral treatment of investment, capital gains in particular.”

‘During an appearance on ABC Insiders on Sunday, host David Speers pressed Mr Chalmers on one of the most controversial changes in the budget. Picture: Supplied/ABC

”We’re taking one of the big distortions out of the market,” Mr Chalmers said of the decision to remove the CGT discount for non-property assets. Picture: Supplied/ABC

Viewers were quick to point out that Mr Chalmers’ answer didn’t appear to make sense.

If the CGT discount had created a distortion by pushing too much capital into housing, they argued, then removing the discount for shares would not solve that distortion.

In fact, it could do the opposite, making CGT-exempt primary residences an even more attractive destination for capital than shares or start-ups.

Among the critics of the interview was Wilson Asset Management founder Geoff Wilson, who described Mr Chalmers’ answer to news.com.au as “deflection wrapped in economic jargon” and “classic gaslighting”.

“Shares have been undercompensated for 25 years so the solution is tax them more?” he said.

“It’s pure contempt for investors and anyone trying to build wealth outside property. This is why young Australians are locked out and staying renters.”

Mr Wilson, who manages AUD $6 billion for 130,000 investors, fumed that the interview had “insulted every Australian’s intelligence”.

“It’s totally illogical, it’s not true, and he looked like an idiot. They’re trying to hide that the change to capital gains tax hits every Australian business — small business or a large business listed on the stock market.”

The exchange with Mr Chalmers came after Prime Minister Anthony Albanese gave a similarly confusing response to financial influencer Natasha Etschmann last week.

Mr Chalmers’ answer was dismissed as “deflection wrapped in economic jargon” and “classic gaslighting”. Picture: Steve Pohlner

Mr Albanese sat down with Ms Etschmann for three minutes in a bid to explain the CGT change to young Australians, many of whom invest in shares.

Asked why the change would apply to shares and businesses, the PM said: “We want to make sure that the drive of investment was towards more productive sides of the economy, and the way that the system had worked had distorted the market.

“It had directed the investment much more towards property, which is one of the things that’s contributed to the substantial distortion in the market towards housing rather than investment in equities or some other form.”

Mr Albanese’s reply left Ms Etschmann’s followers cold, with commentators accusing him of refusing to engage with the 28-year-old’s point and “talking in circles”.

“He didn’t answer the question. I’m not sure whether he understands what shares are, because he answered the question as if it was property,” Mr Wilson said of that interview.

“Neither of them (Mr Albanese or Mr Chalmers) answered the question and they tried to pretend that a share is a house.

“They assume that every Australian is stupid by the way they’ve answered the questions.”

How was the capital gains tax discount changed in the budget?

Last week, Mr Chalmers broke Labor’s election promise not to touch the capital gains tax (CGT) discount.

Pre-budget leaks had suggested Mr Chalmers would remove the discount for investment properties in a bid to reduce incentives for speculators and rein in the housing market.

On budget night however, the treasurer went much further, replacing the discount with an indexation model for all assets.

The change means that Australians who own shares and businesses will no longer receive a 50 per cent CGT discount when they sell after July 2027, and will instead pay tax on their indexed capital gain at their marginal income tax rate of up to 47 per cent.

Superannuation, main residences and new residential builds are the only assets exempt from the changes.

Aussie entrepreneurs and investors have since pointed to New Zealand, which doesn’t have a CGT, as a more welcoming environment for businesses and innovation — a suggestion the New Zealand government has embraced.

Data from The Australian Financial Review also shows less than 40 per cent of capital gains earned by individuals come from property, starkly contrasting from the Albanese government’s claim that increasing the tax for all assets will help young home buyers.

News.com.au has contacted Mr Chalmers’ office for comment.

Source: https://www.news.com.au/finance/economy/chalmers-accused-of-gaslighting-in-tax-clash-as-treasurer-is-grilled-on-why-key-discount-was-removed-for-nonproperty-assets/news-story/706a8ad618a9c22f2eced96262ed008a