Why the capital gains tax debate is about Australia’s investment future

The capital gains tax debate should not be reduced to a technical argument about tax rates and formulas. At its heart, it is a debate about whether Australia wants more people to invest, take sensible long-term risk and build financial independence. 

That is the bigger question policymakers should be asking. 

Before any investor makes a decision, the first question should not be, “What is the tax outcome?” It should be whether an investment supports their financial objectives, time horizon, risk tolerance, and need for income or growth. 

That is why this debate matters. 

When tax settings become so complex that they influence whether people invest, when they sell, what assets they hold and whether they are willing to take long-term risk, the system has moved beyond collecting revenue. It has started shaping behaviour. 

For decades, governments have encouraged Australians to save more, invest more, build wealth, become financially independent and reduce reliance on government support in retirement. 

Yet the direction of this debate risks sending a very different message. 

The Australian Shareholders’ Association recently surveyed more than 1,100 investors about the proposed capital gains tax changes. Nearly 70% said the reforms would make them less confident investing outside superannuation. More than half said they may consider selling assets before the new rules commence, and more than half expect they would need paid professional advice simply to understand the changes. 

Those findings should give policymakers pause. 

Good tax policy should encourage productive behaviour. It should support long-term investment, provide certainty and be simple enough for ordinary Australians to understand.

This is not just an issue for wealthy investors.

It matters to younger Australians investing outside superannuation while saving for a home deposit. It matters to working-age professionals steadily building a portfolio to create choice and resilience. It matters to self-funded retirees who rely on shares for income, liquidity, and dignity in retirement. 

It also matters to Australians who are not yet investing but aspire to do so. 

According to the 2023 ASX Australian Investor Study, 7.7 million Australians invest in ASX-listed securities outside superannuation. These investors provide capital to Australian companies, support capital raisings and help fund future growth. 

Without investors willing to commit long-term capital, there is no next generation of Australian success stories. 

The sectors most dependent on patient capital are often those that drive future productivity. Start-ups need investors willing to back an idea before the business model is proven. Biotechnology companies can spend years progressing research before generating commercial returns. Early-stage exploration and critical minerals projects can take a decade or more to move from discovery to production. 

These investments are not suitable for everyone. They carry risk and require careful assessment. But Australia benefits when capital is available for innovation, discovery, and growth. If the rewards for long-term risk-taking become less attractive, capital will flow elsewhere. 

Australia already faces a productivity challenge. We need more innovation, more investment, and more successful Australian companies, not fewer. 

The answer to Australia’s economic challenges is not fewer investors. It is more Australians participating in wealth creation, backing productive enterprise and building financial independence. 

The greatest risk in this debate is not simply that investors may pay more tax. The greater risk is that Australia gradually becomes a country where fewer people are willing to invest, fewer people are willing to take risk and fewer people believe the rewards justify the effort. 

If that happens, the cost will be measured in reduced investment, slower innovation, and fewer opportunities for future generations. 

That is the bigger question policymakers should be asking.

Interested in learning more? 

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By Rachel Waterhouse, CEO, Australian Shareholders’ Association