💥 “An embarrassing political reversal may already be unfolding behind closed doors…” A former government economist is predicting a ‘humiliating backflip’ on the controversial CGT changes

As it faces fierce opposition, Labor appears to be pushing ahead with its overhaul of the tax.

It plans to introduce legislation — that pulls together multiple budget measures to the House of Representatives — on Thursday.

They include the $250 tax offset for workers, a $1,000 standard tax deduction, along with CGT and negative gearing changes. This makes it harder for the opposition to oppose the changes as it planned to support the $250 offset.

As it faces fierce opposition, Labor appears to be pushing ahead with its overhaul of the tax.

It plans to introduce legislation — that pulls together multiple budget measures to the House of Representatives — on Thursday.

They include the $250 tax offset for workers, a $1,000 standard tax deduction, along with CGT and negative gearing changes. This makes it harder for the opposition to oppose the changes as it planned to support the $250 offset.

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However, further backlash has erupted after Anthony Albanese’s government revealed this week it would consult small businesses and big industry on CGT carve-outs, and not just tech start-ups as expected.

This created widespread confusion over how far Labor was willing to go on changes to the budget and whether it was setting the stage for a major backflip.

Private hedge fund manager and former NSW government economist Derek Francis said he had sold $400,000 of shares in the past couple of weeks after realising the full implications of the government’s capital gains tax overhaul for the sharemarket.

Prime Minister Anthony Albanese during Question Time at Parliament House in Canberra. Picture: NewsWire / Martin Ollman

This morning, the former staffer for Liberal politician Paul Fletcher launched an official complaint with the ACCC. He said up to 1000 major investors were about to sign it.

“I’ve just lodged an official complaint with the ACCC, asking (the chair of the body) Gina Cascogli to get the government to immediately back down because the behaviour is anti-competitive,” he said.

“The reason why is they’re (the government) is raising the price on us by 40 and 50 per cent which makes share trading unviable.”

He said the CGT changes will force his clients to sell their portfolios and go into a managed fund.

“And we can only go into one managed fund. We can’t go into multiple ones that are similar in one managed fund,” he said.

“Then we’re basically trapped. Because they can up the fees on us. So it’s clearly blatantly anti-competitive conduct. They can just jack up the fees and you’re absolutely f***ed. It’s absolutely crazy.”

‘We’ll blow up 30pc of the economy’

He is also predicting the Prime Minister will make a spectacular U-turn, citing the government’s change in position on carve-outs.

“He has to back down because Treasury now realises it’s a fundamentally flawed policy that will blow up the economy,” he said.

“Commonwealth Treasuries advise him not to proceed with the policy because of the damaging effect to the economy. If it actually goes ahead, we’ll blow up about 20 to 30 per cent of the economy.

“This is one of the most dangerous times I’ve ever seen in the Australian economy, and I don’t know how the government could be so reckless.”

He said the changes would force 80 or 90 per cent of direct retail shareholders into a single managed fund, or pay taxes that are 40 or 50 per cent higher than if they held them as part of the managed fund, which is unviable.”

He said the biggest concern with the indexation change is the asymmetric treatment of winners and losses.

“It’s not that it applies to certain sectors, it’s a structural flaw where the only way it won’t create devastation is if a particular party it backs is exempted, in which case you have to exempt everyone,” he said.

Mr Francis said he had sold his shares because Australia had become “completely uninvestable” outside of superannuation under the new tax settings.

“And the reason why is because everyone puts up risk capital. They always invest subject to uncertainty,” he said.

“And if you invest in a regime where you win, the government takes a lot. If you win, the government takes 70 per cent, but if you lose, you lose the full 100 per cent. If that happens, then risk capital just stops being invested. The economy essentially comes to a complete grinding halt.”

‘They are making it up as they go along’

Mr Albanese’s comments on Monday came after he had already indicated last week that Labor would rethink its raid on testamentary discretionary trusts — a part of the budget reforms that has been likened to a “death tax” by a “thousand cuts”.

Now, industry leaders say it appears the budget measures are being retrospectively “patched up”.

One business leader told The Australian that the government had not expected the extent of the backlash over CGT and government discussions were shifting on an almost “daily” basis.

“They are making it up as they go along,” they said.

Ryan Stokes, chief executive of CGH, a diversified operating company