The Australian Industry Group (Ai Group) has proposed five amendments to the Albanese government’s planned overhaul of capital gains tax (CGT) in an effort to mitigate its impact on business investment. The proposals come as the government prepares for public hearings on a bill designed to tighten CGT rules and restrict negative gearing, scheduled for Monday and Tuesday.

Ai Group, together with the Business Council of Australia, the Australian Chamber of Commerce and Industry, and the Council of Small Business Organisations Australia (COSBOA), has collectively urged lawmakers to reject the legislation. The groups warn the bill could deter investment at a time when Australia requires it most. They argue the reforms conflict with the objectives set during an economic reform roundtable chaired by Treasurer Jim Chalmers last August, where participants agreed tax changes should encourage, rather than discourage, business investment.

Ai Group chief executive Innes Willox has outlined a potential compromise if the government chooses to proceed with the overhaul. Key elements include applying genuine prospectivity to the CGT “first auction” scheduled for 2023, averaging capital gains over multiple income years, and limiting the new indexation model to existing investment properties. Additionally, Mr. Willox emphasized the need for complementary personal and corporate tax reforms, citing Australia’s relatively high tax rates compared to other OECD countries as detrimental to productivity and competitiveness.

Mr. Willox highlighted concerns from Ai Group’s 60,000 members spanning manufacturing, construction, defence, and energy sectors, noting widespread apprehension that the changes could stifle investment and job creation. Many businesses are reportedly reconsidering planned investments or restructuring existing arrangements due to uncertainty around future tax liabilities.

Prime Minister Anthony Albanese and Treasurer Jim Chalmers have downplayed expectations for extensive alterations to the proposed tax regime, which would replace the current 50 percent CGT discount with an inflation-linked discount and a minimum 30 percent tax rate. The government is focusing on targeted carveouts for start-ups and is considering raising the threshold for small business concessions from the current $2 million turnover cap to $10 million, as advocated by COSBOA.

The legislation is slated for passage before the end of July, with negotiations ongoing over specific carveouts and concessions. Initially, the government reportedly considered excluding many critics from the upcoming inquiry but later reversed that decision, allowing broader participation in the review process.

Business groups remain united in their call for more substantial revisions, arguing that the current proposals could undermine Australia’s attractiveness for domestic and international investors at a critical juncture for the economy.