Anthony Albanese leaves door open to more tax changes as he struggles to explain complex policies to public

Anthony Albanese has left the door open to further tweaks to the tax policies central to last week’s Federal Budget, as he and his Treasurer continue to struggle to sell their plan to a sceptical public.

The Prime Minister conceded new tax arrangements for trusts will take longer to bed down than capital gains discounts as he and Jim Chalmers again had their sales roadshow bogged down by questions over the Budget’s broader impacts.

Several Labor sources questioned why ministers had chosen options that were so complex they were still struggling to explain the policy a week on, rather than limiting capital gains changes to housing only.

It appears start-ups will have their concerns about tax levels addressed, but this won’t be certain for another fortnight.

Mr Albanese and Dr Chalmers are facing backlash on two fronts, in addition to the political attack from the Opposition.

A meme campaign by small business owners and start-ups raises concerns about the capital gains tax changes, which would levy a minimum 30 per cent tax, and up to 47 per cent, on the “real gains” if their company succeeded and was eventually sold.

Separately, there is push back about a plan to impose a minimum 30 per cent tax on discretionary trusts, including those used by about 350,000 of the nation’s 2.6 million small businesses.

Mr Albanese revealed while in Perth on Tuesday that the legislation to revert the capital gains tax discount from a blanket 50 per cent to inflation would be put to Parliament in a fortnight.

But the changes to taxation of trusts, which have attracted strong criticism over recent days, “will take longer to develop” and will be legislated later this year.

“We’ve put in place a system where if you have a fixed trust, then you’re not impacted by any of the changes which are there. We put that out very clearly, very clearly in our budget,” he said.

Deputy Liberal leader Jane Hume said small businesses were “seeing their very structures under threat” and being told to simply change them wasn’t good enough.

“So many small businesses are set up using a trust structure, a perfectly legitimate, perfectly legal structure to set up to protect assets and to assist small businesses,” she says.

“Well, Jim Chalmers has accused these people of avoiding their tax obligations. How dare he?”

Angus Taylor said he spoke to “a bunch” of small business owners over the weekend who felt that they were “under assault” from the budget changes.

Mr Albanese painted the changes to capital gains tax discounts as a return to a 25-year-old system.

“What we are simply doing is returning the system to what was there before 1999,” he said.

“When those changes were introduced, what we’ve seen since then is a massive distortion of investment towards housing away from other forms of investment, because of the changes that were made. What we’re doing is simply moving to a real gains system.

“That’s not when the normal course of business occurs. When a capital gains occurs, it’s looked at the real gains, that is, the gains less inflation as we go forward, and that’s a system that operated effectively between 1985 to 1999.”

Dr Chalmers said that “the Budget was about housing” and making it easier for more people to buy their own home.

But asked when, if that was the case, the CGT changes weren’t limited to property investments, instead of hitting businesses and shares, he said the Government didn’t want to create new “distortions” in the tax system.

“Those distortions which were introduced by Howard and Costello made a negative impact on housing in particular, and we don’t want to replace one set of distortions with another set of distortions,” he said.

Mr Albanese and Dr Chalmers were dismissive of the meme campaign that uses AI to insert the Prime Minister into photos with business owners — “I think some of them are very flattering and I thank them for picking very nice photos of me,” Mr Albanese said — but there is a risk that the idea the Government will take 47 per cent from all companies becomes embedded.

Dr Chalmers said he’d seen plenty of “misinformation” and that “we’re not changing those generous concessions and carve‑outs for small business” in the capital gains system.

He released Treasury modelling showing that over the past 20 years, investors in shares would have been slightly better off with a discount based on indexation rather than the 50 per cent discount.

The average tax rate on gross capital gains will be 21.4 per cent over the next decade, up from 19.3 per cent today.

But small business groups said the combination of the CGT and trusts taxation changes could significantly disrupt the plans of people who had intended to use the sale of their business, built up over many years, to fund their retirement.

Drew Pflaum, founder of startup Savvywise that provides AI advice to tax accountants, said the Albo memes had proven potent because the Budget announcements imposed extra taxes, not tax reform.

“Most importantly, it’s extra taxes on small business owners who are vitally important for the Australian economy — a disgrace if you ask me,” he said.

Lachlan Harris, who was in Kevin Rudd’s prime ministerial office, argued that going beyond housing in removing the CGT discount in fact would create “economy-wide” perverse incentives and urged a rethink.

Labor MP Ed Husic, who was previously the minister charged with growing the tech sector, said startups were “the green shoots, they regenerate the business community” and it would be vital to make sure they weren’t discouraged.

“We’ve got to be able to sort through this broader issue, which we’re doing,” he said.

“I mean, we’re competing with a lot of other nations in terms of technology and the way we use it to improve our lives, not just to make a buck, but to make a difference.”

Another Labor source, with previous experience selling budgets, said Treasury would have presented a range of options and it appeared that the Government had picked the most complex.

They expected ministers would be hearing from backbenchers who were having trouble explaining the Budget measures to people, given the Treasurer and PM were struggling.

“These guys are usually good communicators and they have been lumbered with these thing they’re still trying to explain a week later,” they said.

“That makes it easier to subject it to a scare campaign.”

But they anticipated there would be plenty of opportunities to manoeuvre the policy into a better spot, possibly exempting start-ups or small businesses more explicitly, during the legislative process.

Dr Chalmers flagged during last week’s Budget lockup that he was already speaking to start-ups and others in the tech industry about how to make sure they weren’t hit with unexpected tax bills.

He reiterated this on Tuesday, although stopped short of offering a guarantee they would be carved out.