Labor minister Andrew Charlton grilled over trust, start-up over CGT reform

Cabinet secretary Andrew Charlton has defended Labor’s capital gains tax reforms despite admitting some assets he had held would have been treated “more generously” under the new regime.

Mr Charlton also defended his own use of a trust under a grilling on Sky News on Sunday, denying it was a tax workaround.

Under Labor’s reforms, the former 50 per cent capital gains tax discount would be pegged at inflation, including sales of housing, as well as shares and start-up businesses.

Mr Charlton said Labor’s model meant “a lot of people will be better off”.

How many, he said, “will depend on the circumstances”.

“But, I reckon there’ll be a lot of people who’ll be better off, particularly people who we want to encourage to invest in long term productive assets – that is a good thing for the economy, and it is a good thing for Australia,” he said.

Mr Charlton denied the changes would force the start-up sector offshore because the tax was not competitive compared to elsewhere.

‘Not apples to apples’

“I have seen these comparisons between Australia’s capital gains tax and foreign capital gains tax regimes, and those comparisons are not valid,” he said.

“You can’t compare the tax rate on a real gain in Australia with the tax rate on a nominal gain in another country. That is not apples to apples.

“In many cases, our regime will be more generous to assets who have experienced a lot of inflation over a long period of time, and that is not compensated for in the regimes of other countries.”

Mr Charlton defended the reforms as being targeted at housing equity, stating they would make the system fairer across all classes.

“Some people will pay less, some people will pay more,” he said.

“But, overall, every single asset class is better off because you are taxed across the board evenly on the real gains you make.

“We’re not encouraging short term speculation or any other of the things that were previously very generously dealt with under the old capital gains tax.”

Asked, however, how he felt about having potentially had to pay a 50 per cent tax on the sale of his own start-up, Mr Charlton admitted he’d had “a range of different assets in my life”.

“I have started a business, I’ve grown that business, I’ve sold that business. I’ve owned property,” he said.

“I have owned assets that would be more generously traded under the new regime, and I have owned assets that would be less.

“Across the board I can tell you that across the assets that I have owned, this is a fairer system. I would have lost out of some, gained out of others.

“But, overall, it is a fairer system, and I say that with some experience.”

Sky News host Andrew Clennell quizzed Treasurer Jim Chalmers with a Gen Z term when asking a probing question about the federal budget.

The Albanese government has faced pressure over the impact the forms may have on start-ups, and committed in the budget to consultation with the business sector.

It has also been criticised for the potential impact on trusts, with the government having left the door open to a further tax exemption.

Speaking to Sky News, Mr Charlton admitted he had a trust.

But, he denied it was to minimise tax.

“No, I completely reject it,” he said.

“Trusts are used for a range of different purposes. The primary purpose is asset protection.

“Listen to me, I set up a business (and) like many Australians who set up a business, this is what they do: They walk into their accountant, they tell them that they’re setting up a business and their accountant says, great, here’s your Pty Ltd tilted company, and here is the trust that goes with that.

“Extremely standard process for many Australians setting up a business.

“The purpose of that is not for a tax reduction. The purpose of that is for asset protection.

“That was the reason that I set up the trust, and that was the reason that many small business people set up a trust.”

Mr Charlton said there were “situations where people have paid less tax” because of a trust.

“That’s precisely why these reforms are important,” he said.

He continued: “I think trusts have a really legitimate role and people are getting them for precisely the reason I just described that is for asset protection, it is to support them in the way that they structure their affairs.”Mr Charlton said everything concerning his financial dealings was available on the government registered.

Questioned later, shadow spokesperson for housing Andrew Bragg told Sky News he has never had a trust.