Why Australia's New Capital Gains Tax Is the Best Tax Policy for Crushing the Economy: Derek Francis

Treasurer Jim Chalmers calls it tax reform. Derek Francis calls it "a complete dog's breakfast." Derek Francis — former chief economist at the NSW Parliamentary Budget Office and a fund manager — joins Claire Lehmann to break down a basic error in Treasury's modelling of Australia's new capital gains tax. Treasury calculated tax rates using the average return on a share portfolio, ignoring the distribution of returns — meaning investors get taxed heavily on their winners with no compensation for their losers. The result: effective tax rates of up to 70% on shares, a policy that hits young investors, self-funded retirees, and startup founders hardest, and — according to Francis's own modelling — may end up collecting less tax overall as investment and talent leave the country.

00:00 Introduction 02:18 Highest capital gains tax in the world 03:16 Treasury's modelling flaw 05:20 Real-world impact on investors 07:28 Process failures at Treasury 10:57 Asymmetric tax impact 15:36 Housing and wealth accumulation 16:18 Young investors and app-based investing 17:29 Behavioural effects on tax revenue 22:33 Incentives skewed toward property 24:37 Administrative complexity 27:25 Enforcement and compliance issues 29:18 Likely revenue decline 30:43 Macroeconomic consequences 32:21 Startup impact 36:48 Risk asymmetry 38:26 Government misunderstanding of productive investment 42:07 Proposed solution 43:44 Conclusion

Resources: Jim Chalmers' Budget Announcement — https://www.australia.gov.au Treasury's Budget Modelling Report — https://treasury.gov.au Australian Taxation Office (ATO) — https://www.ato.gov.au

Guest: Derek Francis LinkedIn —   / derekfrancis   Twitter/X —   / derekfrancis