Pirate Congress 2022/Motions/CGT Reform

PM-1 Capital Gains Tax reform
Put by: Andrew Downing

Motion
Adopt the following as a new section 6.7 of the Economic Reform policy.

Closing Capital Gains Tax Loopholes
"Capital gains tax (CGT) is the tax you pay on profits from selling assets, such as property." Capital Gains taxable profit comes from increases in value of a property between buying and selling it. CGT applies when the profit has been "realised", so that it doesn't force business disruption. CGT applies at your income tax rate, to avoid tax dodges by shifting asset profits vs. income. However, current CGT regulations provide unfair benefit to wealthy asset holders vs. regular income earners. There is a 50% discount on CGT, after an asset has been owned for 1 year. Further, CGT is commonly avoided by borrowing against the market value of an asset.

There are a few clearly identifiable factors that may contribute to capital gains, some of which are more clearly reasonable targets for taxation than others.
 * Speculation - the value went up due to increased speculation (or demand) on property value.
 * Economic Growth - the economy grew over time, lifting all property prices with it.
 * Improvement - the owners improved the property, such that its value increased.
 * Inflation - the currency in which the value is denominated, became devalued.

Speculation and Economic Growth are gains achieved without the owner contributing any actual value to the economy. As such, we should view them as valid targets for taxation.

Improvements to the property do in fact require the generation and contribution of economic activity by the owner. As such, we should not view such investment as a valid target for taxation.

Inflation is a change in the value of the dollar that we're counting value in, and as such we should discount any apparent gains according to inflation before applying CGT.

Meanwhile, inheritance should not force a CGT event, since it does not inherently create a realisation of any capital gain.

Pirate Party Australia proposes the following reforms: 
 * As per current Capital Gain Tax law:
 * Owner-occupiers continue to be CGT exempt on their primary residence.
 * Capital loss on sale, may offset current or future capital gains
 * Your CGT taxation rate is the same as your income tax rate.
 * Remove the 1 year 50% CGT discount rule.
 * On Asset Purchase, record CGTBasis = Asset purchase price.
 * On Asset Sale, CGT applies to (SalePrice - DepreciatedImprovement - InflationIndexedCGTBasis)
 * DepreciatedImprovement is the depreciated cost of declared asset improvements.
 * InflationIndexedCGTBasis is CGTBasis with CPI applied since CGTBasis was recorded.
 * On Asset use to Secured Debt,
 * If (TotalSecuredDebt - DepreciatedImprovements - InflationIndexedCGTBasis) > $0.00,
 * Apply CGT to that amount.
 * Record new CGTBasis = TotalSecuredDebt
 * On Asset Transfer as Gift, Inheritance or change of CGT exempt owner-occupier status,
 * New holder may request a formal reevaluation of their asset to record a new CGTBasis.
 * Without reevaluation, the prior owners CGTBasis applies.

Rationale
We want to close CGT loopholes as outlined in the policy:

"However, current CGT regulations provide unfair benefit to wealthy asset holders vs. regular income earners. There is a 50% discount on CGT, after an asset has been owned for 1 year. Further, CGT is commonly avoided by borrowing against the market value of an asset."