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The accounting body says the draft legislation may expose taxpayers to unexpected tax liabilities and should be consulted on properly.
Through the release of its draft legislation on Friday (10 April), the federal treasury aims to define CGT payable assets, the scope of real property transitional relief until 2030 for renewable energy asset sales, as a 50 per cent CGT discount, along with changes applying retrospectively from 2006, as reported by Accounting Times.
Speaking on his proposal, Treasurer Jim Chalmers said he hopes the legislation can bring Australia’s tax laws closer in alignment with the OECD Model Rules and protect revenue.
“The draft legislation also includes targeted amendments …. to clarify that state and territory laws such as severance provisions in property law do not determine which assets are in scope of the foreign resident CGT regime,” the Treasury said on Friday.
CPA Australia argued that the draft reform proposed a policy change, not clarification. The national accounting body expressed concern about the draft, which undermines tax certainty by reopening transactions from nearly 20 years ago.
The body’s tax lead, Jenny Wong (pictured), said that this retrospective tax reform also alters the tax treatment of transactions entered into in line with legislation at the time, which will reduce investor confidence and make Australia a less attractive place to invest.
Further, the accounting body warned that reform could also expose taxpayers to unexpected liabilities, including penalties and general interest charges.
The reform carries a 14-day public consultation period (10 April - 24 April), which CPA calls wholly inadequate, warning that it limits the ability to fully assess the implications for historic transactions, long-term investments, and commercial structures.
“Two weeks is not meaningful consultation – it’s completely insufficient for reforms of this magnitude. This is a major shock for foreign investors and the professionals who advise them,” Wong said.
Earlier this year, Independent MPs David Pocock and Allegra Spender also called for cuts to the CGT discount, with Spender releasing her Personal Tax White Paper in March.
In her proposal, Spender lobbied against grandfathering existing arrangements, saying: “Changes to tax scales usually take effect at the beginning of a tax year without transition arrangements.”
Wong said that if passed, this legislative change would increase disputes and compliance costs, introducing inefficiency for taxpayers and the ATO. She likened the proposal to a family trust election that created prolonged uncertainty and disputes.
“Targeted carve-outs don’t fix the bigger problem – retroactive tax law is bad policy. If change is needed, it should apply prospectively and be developed through proper consultation,” Wong said.
“Tax integrity depends on trust, certainty, and fairness – once those are damaged, they’re hard to rebuild. This proposal puts all three at risk.”
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