A Taxing Debate

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[Music]

Hello, I'm Alan Kohler, Editor-at-Large of Intelligent Investor and Finance Presenter and Columnist for The ABC.

And I'm Stephen Mayne, contributor at Intelligent Investor, Founder of Crikey and shareholder activist and we are...

And we are...

The Money Café.

The Money Café.

Well, Alan, how are you holding up with - well, we'll get to the budget in questions, I guess, but still a fair bit geopolitically, Trump to China, the Strait - will it ever open? What's your latest hot take on all the geopolitical issues?

Well, I think Trump went to China hoping that they would pressure Iran into opening up the Strait of Hormuz and who knows whether Xi Jinping tried to do that, but it certainly didn't work if he did. Some ships are getting through, it's unclear whether they're paying Iran's toll or not, some of the kind of talk seems to be that they, some of them are paying the toll, some are not. China is getting most of its ships through the strait, so that's probably Xi Jinping didn't care much about forcing Iran to open it up fully. I think the main consequence of the kind of attack on Iran that Israel and the US mounted at the end of February, is that Iran's now got control of the Strait of Hormuz that they didn't have before and that's kind of where we stand.

Trump has said last night, he told reporters that we might have to give them another big hit in order to make them see sense. We'll see if that would work, because it didn't work last time and don't forget, this is a regime that didn't think twice about killing thousands of their own citizens when they protested earlier in the year and I don't think they'll care too much about whether people get killed by American bombs, you know?

It is looking like a quagmire, isn't it? Just a standoff... Trump started two wars, a tariff war and an Iran war and he's backed off on one and stuck in a quagmire on the other. There's a risk he goes the way of Jimmy Carter with this being the thing that people remember him most for. People are saying that the oil reserves are falling, the Brent crude futures in December have leapt from 70 bucks to 90 bucks. Reserves are falling, June-July, if the strait remains predominantly closed, then you will see a lot more grief, demand destruction, jet fuel, fertiliser... The impacts are going to get significantly greater if the quagmire remains in place.

That's right. Leaving aside all the fertiliser and all the other stuff, we seem to have settled into a deficit of 6 million barrels a day, according to the International Energy Agency and that deficit is being made up out of inventories and naturally, of course, they're starting to run low and they'll, at some point, run out. They can't keep going on, it's got to stop.

Trump took the heaviest hitting business delegation ever assembled to China and they didn't actually seem to have a whole lot to do over there. The number one Chinese message was Taiwan and nothing was done on chips. Jensen Huang's there and Trump hasn't opened up the chips. I thought your comment on Insiders was interesting about chips and planes are the two industries that the Chinese don't dominate, so they announced a 200 planes Boeing deal, but there was no sort of chip deal. A distinct lack of news that came from assembling the greatest ever business delegation put together, Tim Cook, Musk, Jensen Huang, a whole bunch of others... They would have all gone back to their boardrooms and said, "Well that was a waste of time."

On a slightly other matter, did you see that Trump released his first quarter share trading disclosures?

He trades as busily as he posts on Truth Social, isn't it? Apart from trading and posting on Truth Social, what else does he do with his day, apart from playing golf?

Well, there were 3,700 share trades in the quarter, which kind of averages out about 100 trades a day, I mean it's unbelievable what he's doing. Somebody posted on X last night, they've gone through the trades and found that most of them or at least a lot of them were done before he announced something concerning that company. It's basically insider trading most of the time. He buys shares in the company and then in one case, he visited the factory and talked about how terrific the company is having bought the stock, The Justice Department or some other part of the Government is negotiating a deal with the company, he buys the stock and then announces the deal or the new regulation... I mean, it's unbelievable, what he's doing.

He and his billionaire mates are clearly monetising the office and that's his biggest concern, is him and his family, his billionaire mates and monetising the office. I think he'll go down as the most corrupt President in US history. Nothing's stopping him now.

We've got a lot of questions about the budget, so we probably need to get onto it, but have you stood for any boards lately?

I've actually got eight tilts in the next nine days coming up, mainly to do with retail shareholders being ripped off with placements, with no share purchase plan and also dinosaur physical meetings in Perth, but you'll be amused by this one, Alan. I've managed to unite the Chinese Communist Party and the Murdochs over the last week, because they've both voted against me. At Grange Resources, it's 48 per cent owned by a Chinese state-owned entity called Shagang and I got more than 99 per cent of the votes against me, so the CCP weren't impressed my nomination and voted against and then yesterday, the Brisbane Broncos, the Murdochs who own 68.9 per cent, have voted against and I got my worst ever vote, I got 99.8 per cent against.

But I've just gone and looked at the numbers, if you strip out all the votes that the Murdochs controlled, I actually got 21.4 per cent of the vote. I had 136,000 in favour and 500,000 against, so nobody else bothered to vote, it was just Rupert's 68.9 per cent. I picked the wrong year to run for the Broncos, Alan, they won both the men's and the women's premierships.

And they've decided that they don't need Stephen Mayne?

Correct. Well, the Murdochs were never going to vote for me, but the Murdochs are now $100 million in front on their Broncos investment, so I reckon they should cash out, but I couldn't go because I've done my back. I couldn't fly to Brisbane or turn up...

You've done your back?

Yeah, I'm waiting for a cortisone injection, I've been in bed the last three days.

In bed? Crikey.

Every two years I have to get a cortisone injection because my discs are too close together, the nerves have all gone, I get totally crippled and then I get this magical cortisone injection and it keeps me walking again for two years and then all of a sudden, I wake up one day and I'm crippled and can't walk. Every two years - it happened on Monday, so I've been bed-ridden all week and I'm crouched over my desk here, talking to you, trying to stave off the pain, waiting for the steroid injection later today.

Well, I hope you get better soon, Stephen.

But look, I'm a 56-year-old fit man and you're into your 70s and you're fitter and healthier than me, it seems. You've been everywhere, Alan, you were on the Insiders' couch, I've listened to you on Michelle Grattan's podcast... The budget - and we'll get to this with questions - but what was your Insiders' experience like? They didn't fly you up for the budget, but they flew you up for Insiders the following Sunday and you caused a storm on Twitter with your incisive cut-through budget commentary. What was the experience like at your end and what was the reaction like?

The experience was good, I like David Speers, I like Phil Coorey, I like Samantha Maiden. It was a good experience, it was my first time on the Insiders' couch. It's a bit of a pain in the neck going to Canberra for it so I'm not going to rush back in a hurry, but it was nice to do it.

Well, everyone said you did very well, you were straight-talk Kohler, telling it like it was. I did like your summary of the bracket creep, is that Fraser brought it in, no one thanked him for it, it was a hidden tax cut, so he got rid of it and now Angus has gone for it.

That's what I said, when you're a politician, what you don't want is hidden tax cuts, you want hidden tax hikes.

Exactly. Now, we've got every possible angle in question, this is more important than ever this week that I think you need to do our disclaimer.

Before we get to the questions, we have to have a little word from our sponsor, so here's that.

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Just to remind people, we give general advice only, we can't do personal advice and we don't know anything about you, so that's the general advice warning. Off you go, Stephen, you're going to read the first one!

Ian says, "Not so much a question as a comment to say a big congratulations and thank you following the budget night announcement that this is the end of the negative gearing and capital gains discount cocktail for investors in housing. When I read your quarterly essay calling for these changes, I never thought I'd see it happen and yet, here we are a few short years later thanks in no small part to your persistence and work in explaining it in simple terms to everyday Australians which has helped pave the way for this to become politically possible. I hope you enjoy this moment, Alan, and a well-deserved celebratory drink." Alan, unfortunately the budget is a whole lot more than just what you were calling for, so I'm sure you're going to distance yourself from every other attack on trusts and shares, but in terms of the housing one, you must feel like it is a bit of a win?

Oh yeah, sure, it is definitely a win. I mean, this might short-circuit some of the questions, but I find it very interesting, everyone's carrying on about it, how you've got to pay more capital gains tax on housing. I thought we had a consensus in Australia that housing was unaffordable and we have a crisis and we need to make housing more affordable which doesn't mean anything else but not having capital gains on housing, so there shouldn't be any tax to pay because there shouldn't be any capital gains on housing anymore because we need to make it more affordable and everyone agrees on that.

Maybe it won't work because they're not building enough houses or basically the Government policies to make housing more affordable won't work, okay, maybe that's true, but I think if you do bet on getting a taxable capital gain on housing, what you're doing is you're betting against the Government, you're betting that the Government won't succeed. Well, fair enough, go for it, but that's not a bet I want to make.

Well, the Government is saying 2 per cent less annual rise in house prices as a result of its policy suite on budget night. It will be very interesting to see - we've had obviously the first weekend of auctions looking a little bit tepid, but it is a bit early. It will be interesting to see if it does create a fear of sub-optimal returns in housing going forward. But what the policy changes don't do is force people to sell. This has always been the experience in Australia, is that we've never had a reduction on house prices of more than 10 per cent and whenever prices fall a tiny bit, volumes fall because people go, "Well, I'm not going to sell into this market."

I thought the negative gearing component of the budget was the most tepid, in a sense, in that they've grandfathered everything and the music still plays on new builds, so if you've got an apartment off the plan buy - my first home was an apartment off the plan - you're competing with those very same tax driven investors, albeit in an environment where people are a bit concerned that the market's overheated and toppy and might not go up very much. But I was surprised that they just did so much else in the budget and the actual negative gearing on housing component, because of the grandfathering and the continuation, it actually wasn't that comprehensive and I don't think it will have that big an impact on - well, 2 per cent a year, by definition, is not a big impact.

No, it's not and what it would do, if 2 per cent a year happens, that would bring the average rise in house prices back to the rise in incomes, in wages, which means that house prices would continue to rise at the same pace as wages, which maybe you can say that's okay, but basically that means that the current house price to income ratio would continue on. That means that if we've got a crisis now in terms of affordability which is expressed in the house price to income ratio, then that's where we're going to stay.

If you're starting with nothing, Jim Chalmers did say, house prices have gone up 400 per cent since 1999, which was your big line in the essay and frankly, if you're starting with nothing now, it's even harder to get into housing, as we'll get into with future questions about increased taxes on every other savings vehicle out there. Anyway, your turn.

Julie says, "Okay, I understand the budget's reasoning with the treatment of investors that invest in new homes, versus the treatment of investors that purchase existing homes. Lowering the incentive for investors to purchase from the limited supply of existing homes gives the first home buyer a bit more leverage to compete in the used housing market and providing incentives for investors to build homes increase supply. All good, but what I don't understand is the CGT changes on shares..." And I think Michael has a similar question - he's got a son saving his money and putting it into the stock market, hoping one day that they can break into the property market, "His reaction was that he'll now just get slugged with more tax on his shares."

They've decided to make the changes apply to all assets, what Jim Chalmers has said about that is, he's argued that the capital gains tax discount and negative gearing are long-standing system-wide tax settings that apply to all assets, so any reform should apply broadly to all assets as well and that sort of thing. But he hasn't really given a detailed asset by asset justification. He said why we need to do it for property, which is fair enough, but he hasn't said, "We need to do this for shares..." and I don't think he can, I don't think there is a reason to do it for shares, so I suspect that they'll probably take it off if they can - I don't know if they can actually take it off shares, I certainly think that they will if they can.

I think they'll give ground in two areas. The reaction to the budget has been enormous, enormously negative, not just the integrity/broken promise thing, but the fact that there's masses of losers and very few winners, so it's a very unusual budget. The idea that you get the minimum of capital gains tax, 30 per cent, even if you haven't used your tax free threshold. So you're a young person, trying to save up, you've had a little bit on the share market - bang! A flat 30 per cent on your shares... That's brutal, I don't think that will survive.

Then you've had all the memes on the 47 per cent start-up business stuff and we'll get to that in later questions, but that's going to be unsustainable, the world's highest capital gains tax rate on start-up businesses and the memes of "Welcome Albo, 47 per cent shareholder in our business." That's toxic, politically, he's being mocked and laughed at. I think that's going to be tough. But look, we'll keep going.

Mark says, "As a deflated 36-year-old with a million dollar mortgage on a $1.5 million house, I wonder what's next? Clearly, tax incentives and supply have helped property consumers drive wealth in Australia, it looks like gravy train will finish and instead, housing may see 2 to 5 per cent raises each year, while other industries like shares or tech return over 10 per cent." Mark goes on to say that he feels deflated because he's worried that he's overpaid for his house and that asset is not going to perform and he's going to be under the pump. This is the political tightrope that's being walked here, is that because we are the world's most indebted households with massive leverage on property, anyone who's entered the market in the last two to three years, the later you've entered, the worse it is for you.

And anyone who's got leverage - and Mark's got a million-dollar mortgage on a $1.5 million house, so he's two-thirds leveraged, very exposed to a 10-15 per cent drop in housing or just it going nowhere because you've got to come up with servicing a million-dollar mortgage every year and that's not even tax deductible, you've got to service that mortgage with after-tax dollars. There's a large cohort of heavily indebted mortgagees out there, whether it's negative gearing or owner-occupier who are going to be very nervous about a property market correction and this is the tightrope that the Government's got to walk, isn't it?

Yeah, well we've had 25 years of housing prices rising at double the rate of incomes and that can't go on. So, at the very least, the rate of increase in house prices has to come back.

But we can't afford a Canadian style 20 per cent reduction in house prices. The Reserve Bank will be conscious of it with interest rate settings, the Government will be conscious of it with migration settings. You're right, I don't think we're going to see a reduction because the moment you did see a reduction, all the anger of the Marks of the world who are suddenly really screaming and in more pain will kick in. It's a very delicate balancing act to get... Alan, you may as well do Tara, I think.

"As a woman in my 40s, I can't help feeling defeated with this new budget, mainly the new minimum 30 per cent tax rate on capital gains, sales on shares. I work in graphic design, so I can see the writing on the wall with AI overtaking my industry in the coming decade. I've been working so hard to put away the majority of my income into shares to live off a supplemented income for when my industry inevitably collapses. If I'm no longer able to access a tax free threshold when I start selling down my shares, how on earth am I meant to support myself without paying an exorbitant amount of tax. Do I retrain now in my 40s into another industry and start again from the bottom?"

Well, I think that's right, the 30 per cent tax rate on capital gains and on trusts for that matter, was a surprise in the budget, I don't think that was expected. The shifting of the capital gains tax discount to the inflation adjustment was kind of leaked but they didn't talk about there being a 30 per cent minimum and I think that's kind of caught everyone by surprise. What it means is, if you sell an asset and your marginal tax rate is below 30 per cent, you're going to have to pay 30 per cent.

They've created two classes of income. There's the salary class and then there's the capital gains tax class. You can't use your $18,000 tax free threshold on capital gains anymore, you go straight to 30 per cent. I know the Labor Government's always going to favour labour, the old labour versus capital, John Howard went too far with work choices and I think this is going to be Labor's work choices moment. They've suddenly got control of the Senate with the Greens, they're the Labor Party and they've done a big hit on capital. They've gone so far, they've even hit a punitive 30 per cent capital gains tax on someone with no other income. You can be as poor as you like, you have no other income and you're paying a flat 30 per cent capital gains tax.

That is going to be politically unsustainable because a lot of young people are into shares. My kids can't afford a house, still living at home, building up their shares and so it's hitting... I just think this policy is not going to be sustainable and they'll have to just go back to capital and labour being not distinguished between and you are taxed on your marginal income tax rate regardless of what sort of income it is. No one saw it coming. Normally, at Council, you put out a draft budget and you call for consultation. This should have been a public submissions process for a review of the tax system. To bury all this in the budget out of nowhere, no warning it was coming, was remarkable. I just can't believe that Albo's over-reached like this, the hubris... Every tax grab from the bottom drawer that he's ever had seems to have come in here - we'll get to trusts, but I just find this flat 30 per cent unbelievable and I can understand why Tara's feeling upset about that. A lot of people are upset.

Simon says, "Given Alan has highlighted the productivity growth in Australia, do you think higher taxes on start-ups and high growth companies will make this issue worse?" That's a bit of an obvious statement, but where are you on the start-ups one, Alan? They've promised consultation and positive possible measures to deal with the 47 per cent tax on your start-up which is flipped after two or three years? Where do you think they'll go with it and why do you think they did it as brutally as this? Why no carve out for start-ups? Start-ups was the reason that Howard did this in the first place, because people were paying such huge tax bills during the tech boom.

I do think they'll have to do something about start-ups. I sold a start-up...

So did I, we both did.

The cost base is zero, so therefore you don't pay tax on the capital gain, you pay tax on the wholesale price, you have to pay the tax on the whole amount. It is a bit of a whack and I suppose the 30 per cent minimum really makes a difference too. I think that is an issue, for sure.

If you look at other countries, Singapore and New Zealand don't have any capital gains tax. In America, I think it's 23 per cent, but the first $10 million gain is free. They won't go to zero, but they'll have to - at the moment, I think there's exemptions for businesses with revenues of less than $2 million, so it's not just punitively on everything, there are a number of carve-outs, but I think they'll have to do something about the first proportion is tax free or something like that, or to cap it at 30 per cent or something. The reason it's different with start-ups, with housing, you always have a capital cost you've put in, you buy the house for a million, sell it for a million-and-a-half.

But with start-ups, there was an architectural firm letter to the paper at the Fin Review this week, what are the costs of building an architectural practice? Not much - computers... When you sell it, it's all capital gain, it's all profit, but you might have worked for nothing, mortgaged your house, taken a risk... This is the thing, if you go bankrupt doing a start-up, Albo's not going to come in and pick up the pieces for you, is he? He's not going to come in and say, "Well, you took a punt..." But if you suddenly go well, 47 per cent, top marginal tax rate.

This is the inequity of it, is it's not paying attention to the genuine risks and sacrifices that founders will do and I think it will drive down entrepreneurialism or Australian-based entrepreneurialism, although there was that famous quote from Warren Buffett who said, "He's never known anyone to not make an investment because they're worried about the tax they're going to pay at the end." But there's been so much publicity about this 47 per cent. I think that if you were starting out now, you would say, "What about Singapore? What about New Zealand?" Because capital is mobile... I agree, they're going to have to go somewhere with this and make big changes on that front.

While we're on that sort of thing, we've got a couple of questions later on about trusts and the new 30 per cent minimum tax on trusts. Mick says, "Family trusts are an important tool for asset protection. Do you think Jim even considered this when he took a hatchet to a centuries old structure? What other options do we have now to protect the family's wealth?"

Philip says, "Could you explain how the tax on trusts helps intergenerational equity? The new tax replaces marginal tax rates on trust distributions with a 30 per cent flat rate. This means that an individual paying tax on the distribution from a trust is paying the equivalent tax on a $250,000 salary of someone on a marginal tax rate, how is this fair?" There is an issue here with income splitting, which is what the trusts are mainly used for, so that people who are partners in big accounting firms or law firms or just in business, they get income into the trust and they distribute it to their spouse and children who are on lower marginal tax rates. The ATO has been trying to crack down on this for years by saying the recipient of the distribution has to be part of the business, they have to be earning some of the income. They've been trying to deal with that but they haven't been able to, it's just too hard, they can't really prove whether anyone is participating in earning the income or not.

So I think what this new 30 per cent minimum means is that the ATO's given up trying to ensure that the recipients of distributions in trusts actually help earn the income and they're saying, "Okay, we're just going to give up on that, we're going to make it a flat 30 per cent."

A flat 30 per cent, which is a very brutal move. The data shows that there's 840,000 trusts out there in Australia and overall, the people using the trust structures are paying 4 percentage points less in tax overall. So it is a bit of a tax shelter, but I think they've been really brutal, coming out with this 30 per cent flat rate and we should probably briefly touch on the death tax claim, the testamentary discretionary trusts. There's 10,500 testamentary discretionary trusts out there at the moment, they're grandfathered, they're fine. But after July 2028, if you set up another one of those to deal with your estate, a discretionary trust where the person who's passed away gives discretion to the people who are the trustees, they'll be taxed at the 30 per cent rate, so obviously no one will use this structure going forward and you can still go with a fixed trust, where the person who's passed just specifically prescribes who's getting what.

I don't know why they've made a distinction between discretionary versus fixed. There's no death tax in Australia, there's no death duties and this structure will not be used when it no longer is tax sheltered for wills and estates. But overall, we're going to need to have mass funerals for the trusts of Australia. They've just made trusts very, very unattractive and their goal seems to be super, super, super. The most tax preferred place to do anything is super. A lot of the advice you hear now is just put all your money into the family home because the family home is still tax protected, use your grandfathering where you've got it and then $2 million into your super, husband and wife, before you hit the punitive tax levels in super.

Keep it simple, use super - because even on capital gains tax, the tax rate within super funds is only 10 per cent because you get a 33 per cent discount, so it's 15 per cent tax within super and then if it's a capital gain, you get a 33 per cent discount on that so it's down to 10 per cent. It's Labor, they created super and they're shutting down all other options outside of super and they're saying, everyone, we want you to use super. Super will get turbo-charged as a result of this and there will be mass burials of trusts because they've really gone for it. It's raising more than $40 billion over 10 years.

PC says, "Alan, the Government is projected to strip $77 billion from property and trust structures over the next decade, yet Treasury's own modelling admits this will yield a net gain of just 30,000 new homes, nowhere near the 100,000 promised at last election. If they are raking in a $77 billion war chest while barely moving the needle on actual supply, isn't this simply a massive revenue grab disguised as a policy to help the next generation?" Well, Alan, let's get on with the supply question. It won't help supply, will it? And it will put up rents as well, won't it?

Treasury's modelling says that the capital gains tax and negative gearing changes will lead to 35,000 fewer homes over the next 10 years and they've offset that with this $2.1 billion dollar infrastructure fund which they say will lead to 65,000 extra homes, so it's a net gain of 30,000, but only because of the $2.1 billion they're proposing to spend on infrastructure. The taxation changes on their own, according to Treasury's modelling, lead to 35,000 fewer homes. It's worth airing the forecast of the National Housing Supply and Affordability Council, who's Chair, Susan Lloyd-Hurwitz, I interviewed on Monday, because their job - they were setup with the Housing Accord, their job is to monitor how it's going, demand and supply. They've forecast the supply of housing over the next five years during the accord period to 2029 and their forecast, just to remind you that the Housing Accord target is 1.2 million homes over five years from the middle of 2024.

The council's forecast is for 980,000 homes, so less than the 1.2 million and they forecast demand over the same five years to be 900,000, but the thing is that those 1.2m and 980,000 numbers are gross, they don't include demolitions and the council has forecast net extra housing over the five years, including demolitions, of 862,000, so that is not only a lot less than the 1.2 million target, but it's less than demand. Now there's going to be fewer, as a result of this modelling and they reckon there'll be an increase of 65,000 as a result of the infrastructure.

All this, don't forget, is Treasury modelling and modelling is just another way of guessing, you're just putting some stuff into spreadsheets and hoping it's right. Modelling doesn't mean houses actually appear, let's face it.

That's true, but the approvals for the last three months have actually been ticking up and the migration numbers are coming down, although not as fast as the Government had previously forecast. There is a bit more supply coming on and migration is coming down, but what did you think of Angus Taylor's linking of migration to actual houses built? I thought Abul Rizvi's comment that you might do that as a long-term target, but it's not practical to do it year by year, although obviously he's trying to fend off One Nation and its populist move - but what did you make of Angus Taylor's migration policy and also the bracket creep thing? The bracket creep thing is massively expensive, but it will be very, very popular.

I thought it was a very potent line when the Government came out and said, "You've got a $250 billion dollar black hole with that policy," and he's going, "Well that's what you're admitting, is your tax grab for the next 10 years, so now you're admitting how much you're grabbing off Australians," and we still are paying far more income tax than most other comparable countries and that was the missing thing from this budget, it was a grab of capital without any handback to over-taxed wage earners. I think Angus Taylor will be on a winner with promising real worker tax cuts, which is the missing piece which will presumably come before the election from Labor.

We'll get onto that in a moment. Just on the linking of immigration to housing, that's what I proposed in my book on housing, that that be done. I didn't actually think that they should or probably could actually physically limit it. What I suggested is that every quarter or something, the Housing Minister and the Immigration Minister both put out a press release saying that this is what's been going on, this is the number of houses built, this is the number of migrants that have come in, so that everyone can see what the difference is and then maybe, over time, as a result of that kind of airing of the two numbers, they'd actually understand that they need to be the same.

I mean, I think Abul Rizvi's pretty right, I think it'd be hard to say, if not impossible to say, "We've built this many houses in the last 12 months, so we're only going to let this many people in." The trouble is, part of the problem is, the number of people per house is kind of hard to nail down. The total gross ratio of people per house at the moment is 2.4 or is it 2.5, it's something like that, but the people coming in, there's probably more of them per house or are there fewer? Young people tend to be two per house, not 2.5. There hasn't been any discussion by Angus Taylor of how he's going to deal with the ratio, the number of people per house, as part of this policy. On the other thing about tax indexation, I just think it's an economic winner, it's the right thing to do economically, but politically, Malcolm Fraser campaigned on it in 1975 and then did it in 1976 because he promised to, but it was politically terrible and he gave it away after six years.

I just think that Angus Taylor's had a good week and the economy and taxes is his strong suit and I think Albo and Chalmers are in trouble. Every time you've had a massive broken promise, whether it's Keating's L.A.W. law tax cuts, Gillard's no carbon tax, Howard work choices... The Australian public, they really don't like this and this is the worst budget since 2014 politically and you've seen how quickly it fell apart for Starmer in the UK, I mean he's done nothing wrong, Starmer, and he's got Farage - we've already got One Nation on the rise... I'm just amazed that they've gone so hard with such a toxic budget and all of a sudden, Angus Taylor's - they looked like they were actually in chaos and he's actually sounding quite sensible and everyone's going, "Yeah, that makes more sense."

Anyway, Mason says, "I thought it was interesting to note that it wasn't in last week's budget, do we expect the Labor Government is saving up potential changes to bracket creep or resources tax to be released in the lead up to the next election?" I think that the gas tax thing probably does come next year because I heard Tony Barry saying this week that, "A lot of young people in focus groups are saying, "Why are they hitting us with the 30 per cent capital gains tax on our shares? Where's the gas tax?"" That narrative, that campaign the Australia Institute has run has been very effective and I think that tax will come. Give us a final comment, Alan, from you on the 30 per cent tax on shares? Are you upset by that? Do you think that's wrong, do you think they'll move on that? Putting you on the spot here.

I do think they'll move. I think the purpose of changing the capital gains tax back to inflation adjustment was to remove the mistake that was made. You can make an argument that the whole thing was a mistake in 1999 because it really did favour property. I read the report that came out in 1999 that led to the capital gains tax discount of 50 per cent and the guys doing it, who were John Ralph, Rick Allert and Bob Joss, who were basically company directors - Bob Joss was the CEO of Westpac, or had been - and they said, "We should change it to a 50 per cent discount to encourage investing in shares."

That was the whole point of the change, actually. When Costello announced it, that was why he did it, to encourage investing in shares. Then there was a stock market crash and no one wanted to invest in shares anymore and so it was all put into property. It probably was going to be anyway because property benefits more from negative gearing and the capital gains tax discount because you can borrow more against property, you can borrow 80 per cent against property, but only 50 per cent against shares and anyway, nobody really borrows to buy shares, not many people anyway.

No, that's right. The other point, is with negative gearing, you can run the losses against your wage, whereas you can't do that with shares, that's the really special part about negative gearing, is getting your tax bill down by reporting losses as you hold this thing. A lot of it's depreciation losses. I remember when I bought my apartment off the plan, there was this depreciation schedule and every year I could just bung $10,000 for the depreciation of the curtains, the carpet... It was this whole schedule in the developer document when they sold it. You can't do that with shares, so that's what made property so tax effective. Then throw on quadrupling of prices and then the CGT and it just became a winner. More and more people just won with it, but you have to take away that ability to write down your tax on your income, because that's where it's preferred over shares and every other asset class. You can't do it with bonds, it's only residential property. You can't even do it with commercial property, so they have to shut it down, but they've grandfathered it so it's not going to have a big impact because there's going to be millions of negatively geared properties that will roll on for the next 30 years. It's a bit like the capital gains tax pre 1985. It's taken them 41 years to finally come in and say, "Gerry Harvey, you might have a pre 1985 asset, but you've got to value it June 30, next year, and then if it doubles from there, you're paying capital gains tax on it. There's no longer a total holiday on..."

That was one of the other things I was amazed they reached in and grabbed. I mean, I think it's the right policy, there's not many people with pre 1985 assets, but it just goes to show how sweeping the grab was, that it even pulled in something which for 41 years had been grandfathered. Will they get rid of grandfathering of the CGT negative gearing just like they've killed the grandfathering on pre-1985 CGT?

Yeah, I don't know. I think there'll be some adjustments to this, I think that's true.

There'll be big adjustments but they won't come from the Senate. Abbott's budget in 2014, all the adjustments came from the fact that the Senate was hostile. The Greens will wave through every one of these tax grabs, although they might make some noise if a few young people hit the Greens about the CGT on shares and not being able to use the tax-free threshold. The Greens might step up on that if they get pressured to. If you're a young Green voter, get onto your Greens, because the total budget is totally in the hands of the Greens senators, it's a Labor-Green controlled Senate, no one else can influence it and the Greens have normally been supportive of every last attack on capital, attack on business, but if enough young people hit the Greens up and say, "This is unfair, as I'm trying to save for a deposit." Then I think even the Greens might say, "Give a bit of relief to young people!"

Now, Alan, before we go, we've had a couple of questions on CSL, saying the stock's crashed, do you think it's going to recover? Pointing out that the multiple at the moment does look cheap, relatively cheap. The earnings of the business, the basic core plasma business, is still strong. Is it an overreaction? The stock's gone from a peak of $300 to $98, it's below $100. What are your thoughts on CSL?

Look, obviously it's still a good business, the plasma business is fine. The trouble is that the market, investors have lost confidence in the company. How do they get that back? Share prices are not just a matter of mathematics, they're a matter of confidence and the reason that CSL's shares went to $300 bucks and a sort of PE ratio of 40, more than double the average market PE, was because everyone loved it and everyone thought it was going to keep growing, much more than every other company. Now the market doesn't think that anymore. I actually think that they won't get that confidence back, it's impossible really.

The market's lost confidence in them.

I can't see how they'll recapture that kind of optimism about it. It has been for a long time - it really is just a utility stock, it isn't going to grow sufficiently to justify a 40 times PE again, it just isn't. It has to be 20 times.

I've now got a theory that you've got to watch out for stocks that get above $100 bucks, because Cochlear has also crashed and it's trading at $96. Cochlear is also down more than 50 per cent. WiseTech got above $100, now down to $38.

What about Macquarie?

There's a couple of exceptions I'll come to. Perpetual, I think got very close to $100, now down to $16. Magellan, Magellan was right up there, getting up towards the ton, now down to $8.65. There's two standouts, obviously Macquarie at $241. You'll like this, Alan, I own three and I've got a sell order at $250, because you can't own less than $500 worth of shares, so I'm overweight Macquarie with three, so if they get to $250, I'll be selling one and only owning two. CBA at $162. But these stocks that go through $100, they're not going to just keep going up forever. The two big global C's, CSL and Cochlear, have both fallen by more than 50 per cent in the last 12 months and they have had massive profit warnings and 30-40 per cent crashes in one day, Cochlear's just recently.

No one is above a smashing. But I agree with you, I think CSL's business fundamentally... Cochlear, it's a bit of a narrow - it's a medical device company. CSL is a genuine global big pharma company, top 10 pharma company in the world with a diverse range of products, global operations. I think they'll come back but the market has just lost confidence in their leadership and they'll need to appoint a new long-term Chair and CEO who can rebuild that trust.

Yeah, look, I think we've pretty much covered the budget. If anyone has got more questions about the budget or anything else, obviously, just send them in and next week I'll be talking to James Thomson, so he can give his views on the budget at that point and what's been going on. There'll be more developments, I presume, in the next week or so, certainly a lot more argument about it and we'll see what happens. So, until next week, thanks everyone for listening to today's episode of Money Café. I'm Alan Kohler, Editor-at-Large of Intelligent Investor and Finance Presenter and Columnist for The ABC.

And I'm Stephen Mayne, contributor at Intelligent Investor, Founder of Crikey and shareholder activist, we'll talk to you soon.

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