Labor defends Treasury modelling on compliance costs of CGT changes

The government has said it will not conduct further analysis of the compliance costs of its CGT reforms, despite estimates from CPA Australia indicating costs could be at least three times higher.

Minister for Finance Katy Gallagher said the government would not be asking Treasury to revise the cost estimates it provided for the compliance costs associated with its CGT reforms, despite estimates from accounting bodies suggesting costs will be substantially higher than the Treasury figure.

Speaking in parliament, Liberal senator Claire Chandler noted that the evidence provided during the Senate inquiry into the CGT changes suggested that the compliance costs of the reforms would be at least three times higher than the $88 million per annum cost estimate provided by Treasury.

In a submission, CPA Australia said that it estimated that the complexity introduced with the new CGT regime would result in annual compliance costs in the range of $295 million to $242 million per year.

Chandler questioned whether the government would ask Treasury to analyse its cost estimates again, given the significant difference between the cost figure provided by Treasury and compliance cost estimates provided by the bodies.

Gallagher said that Treasury would not adjust the estimated compliance costs solely on the basis of evidence submitted to an inquiry.

"Treasury's estimates were calculated in the normal way and informed by their work with the ATO, who are experts on these matters," said Gallagher.

"Their advice to the government and the public is that the compliance cost estimate is $88 million per year, and we will continue to look at ways that we can reduce compliance burdens on businesses and individuals. There are a number of elements in this budget that seek to do that."

Senator Gallagher noted that the Tax Reform No. 2 Bill 2026, which implements the permanent instant asset write-off and loss carry-back tax offset, would help to reduce costs for businesses.

"In this budget alone, there is the instant asset write-off, the modernising PAYG reforms and the instant tax deduction, which are all making the tax system simpler," she said.

Institute of Public Accountants senior tax adviser Tony Greco previously warned the government that the accounting profession could be "completely swamped" by the compliance work required under the changes to CGT due to the extensive valuations needed.

Greco noted that the reforms implement cost-based indexation and minimum tax models, alongside complex valuation requirements, and retain the CGT discount for certain asset types.

This will "significantly increase compliance burdens" for taxpayers, he said, and will mean that many taxpayers require the assistance of a tax practitioner to navigate the complexities of the proposed hybrid system.

Greco agreed with CPA Australia that the $88 million per annum cost predicted by Treasury "grossly underestimates" compliance costs, with valuations of illiquid assets in particular likely to be substantial.

"[With these tax changes] we're almost forcing people to get a valuation for these illiquid assets," he said.

CA ANZ Australian leader of tax, superannuation and financial advice, Susan Franks, said that many of the costs would arise from the need to value assets as of 1 July 2027 from a CGT perspective.

"For those that have investment in private companies or need to value goodwill, valuations can be quite expensive, so there's going to be substantial costs," she said.

"There will also be an increase in compliance costs in that when you sell an asset that you own now, you'll have to do two calculations, one for pre- 1 July 2027 and one for post - 1 July 2027."