Labor wants to squeeze your CGT discount on shares — from next year
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Labor’s capital gains tax (CGT) changes in their current form are likely to hurt share investors generally, but may not have as much of an impact on the small cap investor niche.
Currently, investors who hold shares for a year or more get a 50 per cent discount on the tax they need to pay on any capital gain — that is, any profit they make on the sale of the stock.
Labor wants to cut that to 25 per cent for all assets bought after January 1, 2020. Any shares bought before that date would be exempt.
A Labor win may mean a flurry of stock market investing before the start of next year.
But it may not mean much for small cap investors, a section of the market where high volatility and rapid change encourages active portfolio management rather than buying and holding.
ASX data shows that on Friday only three of the 20 most traded stocks on the ASX were larger than a small cap.
The market operator’s last survey into investor behaviour, released in 2017, showed that 62 per cent of Australians had some kind of stock investment and 40 per cent of those had made a trade in the previous 12 months.
Bridge Street Capital director Alex Sundich says small cap investors tend to buy in or sell out on a catalyst, be that drilling results from a resources company or clinical trial results from a biotech, and the majority can be short term holders.
The other side of the story are directors and institutions who tend to have longer term horizons.