Outgoing ASX chief executive, Helen Lofthouse, has acknowledged concerns regarding the federal budget’s CGT changes but says the devil will be in the detail regarding the impact on future IPOs.
Speaking at the Stockbrokers and Investment Advisers Association conference in Melbourne on 19 May, Lofthouse discussed the recent budget changes.
In the federal budget this month, the Government announced it will be removing the ability for taxpayers to discount realised capital gains on shares by 50 per cent. Instead, the cost base of the asset, if held for more than 12 months, will be indexed in line with CPI to determine the capital gains when the asset is realised.
Appearing on the Relative Return podcast, AMP chief economist Shane Oliver speculated that start-ups could face a much bigger CGT bill which would act as a disincentive to listing.
“The impact of the CGT change may be to direct stock market investors towards high dividend-paying stocks which are the older stocks on the market and away from those which are likely to generate good capital growth. That’s significant as it could mean there might be less demand for new IPOs on the stockmarket from businesses which were originally a start-up.
“So the price at which an owner who’s developed a business and tried to list on the ASX may be less attractive than it used to be because there’s less interest in the share market.
“Businesses might conclude that they face all this regulation and are now going to face a higher tax rate when they ultimately sell the business.”
Not only that, a group of young business leaders penned an open letter to Prime Minister Anthony Albanese arguing the changes will “suck the ambition, drive and hope” out of young businesses.
Responding to a question on the matter from Investor Daily, Lofthouse said: “This is a topic that’s got a lot of debate, I do think it’s important that we see some real detailed analysis behind us. Treasury has produced some further analysis but I’m yet to have the opportunity to look at it in detail.
“The caveat is that it is not immediately obvious to me that impact will be as dramatic as some people say. You can paint multiple different scenarios and some are positive and some are negative which is why the analysis is important.
“What I would say that is that investing in companies is a very important wealth creation opportunity for Australians and over the long term, history suggests that investing in stockmarkets is one of the most important vehicles for people and it’s really important that we continue to make that avenue available to people.
“In Australia, a lot of people’s investment has been in property and that has had some distortion effects on property prices. So to the extent that some of the changes could change the relative attractiveness of investments that could be helpful, but we really need to assess more information.”
