I feel like there would be a much more elegant solution to this than just waiving 50% of your taxable income from investments. Especially since asset prices typically go up during periods of inflation, above inflation.

Running with your example, I’ll pretend I bought $1,000,000 in assets 1 year ago, inflation was 10%, and my assets returned a 10% capital gain (I’ll pretend there are no dividends), and I sell for a 10% profit.

Under the current system I made $100,000 as income, and let’s say I sell exactly one year after, so I’m eligible for the capital gains discount.

If I don’t work, this means I only pay tax on $50,000, which is a tax bill of $5,788 (2024-25 tax brackets). Meaning your profit would be ($100,000-5,788)/$1,000,000 = 9.4212%.

If it were the full $100,00 it would be $20,788. So 7.9212% profit, in nominal terms.

You may look at this and go, SEE, you’re actually making a loss so it’s not fair to tax it at the full rate! But this all entirely ignores the fact that periods of inflation have almost always resulted in asset price inflation.

If they wanna make it that you pay tax only on real gains, then I’m gonna argue they ought to do the same for income from actually working. But this would be a disaster for the budget.

We’re being jibbed by people who make money by not working. The argument that the asset has gone down in real terms is the investors problem. As investing involves risk which you wear in order to make a potential profit.

Stop socialising losses in the form of real value loss. That is the investors problem. I don’t see how it’s fair for a worker earning $100,000 to pay $20,788 in tax, but an investor to only pay $5788.