By Andrew Mackinnon
Last updated: 28th October, 2023
Capital gains tax (CGT) in Australia constitutes less than 10% of all tax revenue collected in Australia by the Australian federal, state and territorial governments.
In fact, the percentage of total tax revenue collected that is attributable to capital gains tax is so small that I have not been able to find out what this percentage actually is on any Australian federal government website. The Australian federal government has deliberately concealed this information from Australian citizens and Australian entities.
The Australian federal government does not levy capital gains tax on Australian citizens and Australian entities because it needs tax revenue from capital gains tax. The Australian federal government levies capital gains tax on Australian citizens and Australian entities only because it does not want them to have the full capital gains to which they are legitimately entitled. Capital gains do not constitute income and should not be taxed under any circumstances.
Capital gains tax is in direct opposition to property rights and should be abolished. With capital gains tax in force, if somebody saves up some money and then invests it in shares (or any asset), they quite obviously don’t have full property rights to the asset they purchase, because if they later sell this asset for more than they paid for it, the government wants a cut of the capital gain via capital gains tax. If they have full property rights to the asset they purchase, they could sell it and keep the full amount they receive for it without paying any capital gains tax.
Somebody who trades shares in order to make capital gains and who then withdraws a portion of their accumulated capital, in order to fund their living expenses, does not earn any income and should not be taxed on the capital gains they make. Instead, they are consuming a portion of the capital they have accumulated, in order to fund their living expenses. (However, any dividends they receive from any shares that they own do constitute income and should be subject to income tax, which is currently the case.)
The Australian federal, state and territorial governments could manage on income tax only, collected from Australian citizens at a flat rate of 25% on all income earned by Australian citizens aged 18 years or over, which would currently amount to about $255 billion per year in income tax.
The tax-free threshold which exempts all income below the threshold from income tax should be abolished.
(I previously believed that there should be a flat rate of income tax of a maximum of 20% on all income earned by Australian citizens aged 18 years or over. However, this is not a high enough rate of income tax to fund the Australian federal government and the services it should provide to Australian citizens.)
The income tax rate in Australia should never exceed a flat rate of 25% on all income earned under any circumstances.
As far as I can tell, the number of Australian citizens who submit a tax return in Australia is currently about 15 million and the average taxable income declared on these tax returns is about $68,000.
(Bottom number of individuals.)
(Top-right average taxable income.)
If there was only income tax in Australia at a flat rate of 25% on all income earned by Australian citizens aged 18 years or over, by abolishing the tax-free threshold, then the income tax revenue that the Australian federal government would raise in one year is about 15 million x $68,000 x 0.25, which equals $255,000 million or $255 billion.
Any income tax collected by the Australian federal government at the flat rate of income tax of 25% during any given financial year that has sensibly and admirably not been spent by the Australian federal government during the financial year, as a result of the Australian federal government only delivering strictly necessary services and as a result of its care in managing taxpayer funds, should be repaid by the Australian federal government in good faith at the end of the financial year to each taxpayer who has paid income tax during the financial year, in proportion to the amount of income tax paid by each taxpayer during the financial year, adjusted for any income tax refund owing to each taxpayer.
Whereas what are currently known as “income tax refunds” are repayments by the Australian federal government at the end of any given financial year of overpayments of income tax by taxpayers during the financial year, these repayments of unspent income tax by the Australian federal government at the end of any given financial year constitute repayments of income tax that has been paid by taxpayers during the financial year but has sensibly and admirably not been spent by the Australian federal government, as a result of the Australian federal government only delivering strictly necessary services and as a result of its care in managing taxpayer funds.
The only reason why the Australian federal government also levies capital gains tax, the Goods & Services Tax (GST) and company tax on Australian citizens and Australian entities is that it is sadistically trying to squeeze the maximum amount of tax revenue out of Australian citizens and Australian entities, so that it can spend it as it pleases, such as by showering entities which win tenders to deliver Australian federal government contracts, such as construction contracts, with unearned and undeserved super profits amounting to billions of dollars each year. In this manner, the Australian federal government uses taxation revenue in order to redistribute wealth from Australian citizens and Australian entities who and which pay tax to Australian citizens and Australian entities who and which benefit from Australian federal government spending.
In addition to deliberately raising much more taxation revenue than it needs, the Australian federal government has deliberately saddled Australian citizens with around $1,000 billion dollars in debt. The Australian federal government did not incur this debt on behalf of Australian citizens out of necessity. This debt is a deliberate and vehement expression of derision and contempt by the Australian federal government towards Australian citizens. In effect, it is conveying the message to Australian citizens, “We own you and you will continue to pay excessive taxes to us in order to pay the interest on the enormous debt we have incurred on your behalf and in order to repay the principal of this enormous debt.”