As the Capital Gains Tax (CGT) turns 40 and hits middle age, we felt it was time to take over from Mike Munro and bring you the story of its first 40 years.

The Early years

CGT arrived into the world on 20 September 1985 to proud parents, Bob Hawke and Paul Keating. As a newborn, CGT entered a quiet household, but not for long, with the sometimes troublesome and misunderstood sibling – Fringe Benefits Tax (FBT) – joining the family the following year. Their parents’ subsequent (very public) divorce wasn’t easy on either child.

Great ambitions

The early expectations for CGT were modest. The net gain to Government coffers was projected to be a mere $5 million in 1988 and $25 million by the time it turned 5 years old.

Teenage times

Despite this cautious outlook, CGT quickly proved that it was capable of greater things. Early receipts exceeded Treasury’s expectations, and as it grew, CGT established itself as a steady and increasingly important contributor to Canberra’s bottom line. By 1997, just over a decade after its arrival, CGT-related receipts had risen to around A$2.1 billion.

Its teenage years brought excitement and transformation. At a young age CGT met its first “flame”, Cost Base Indexation. However, their relationship proved fleeting – more of a brief teenage infatuation than a lasting bond.

CGT quickly dumped indexation for the new model in town in 1998, The 50% Discount. This relationship, thrilling and full of promise, would go on to define much of CGT’s adult life. Most that know them consider the 50% discount to be CGT’s better half to this day!

Midlife crisis?

Today, CGT and the 50% discount remain together, however there are fears that Treasurer Jim Chamers could cause “trouble in paradise” for the couple. There’s speculation that the Treasurer could grant a visa to a more youthful 25% discount. He’s also looking ahead to his slice of the greatest inheritance pie the world has seen.

Regardless, CGT has certainly achieved far more than originally expected. Recent years have seen it raise billions annually, solidifying its role as a major contributor to Australia’s fiscal landscape. What lies ahead for CGT and its rocky relationships is yet to be determined. At this point, CGT would just like to have a quiet cuppa and contemplate what can be taxed next.

Happy 40th birthday, CGT!

Learn more

If you would like assistance navigating your own CGT journey, contact Murray Howlett or Tom Howard on (07) 3023 1300.