Former PM Paul Keating comes out in defence of 'sound' changes to capital gains tax discount

Paul Keating has come out in defence of the federal government's tax reform in a scathing statement, which has been dismissed by the opposition as "nonsense".

The former prime minister - who introduced mandatory superannuation, and as treasurer oversaw the introduction of the capital gains tax - said the proposed changes to the capital gains tax, negative gearing and discretionary trusts are structurally sound.

"When Jim Chalmers announces a policy principle to restore the equity of taxing capital profits on a basis of equality with the taxation of income - we hear the howls for continuing preference," he said.

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"The simple fact is that income is taxed too heavily while capital is taxed too lightly."

Opposition Leader Angus Taylor said the remarks were merely "more nonsense from Paul Keating".

"Of course, Paul Keating supports it but frankly I'm not going to be lectured to by someone who thinks putting Australian values at the centre of our immigration policy is racist," he told reporters this morning.

Nationals Senator Bridget McKenzie told Today "you know something's wrong when you have to wheel out Paul Keating to stick up for your budget".

Keating's support comes as the government faces an onslaught more than a week after handing down the federal budget.

Prime Minister Anthony Albanese and Treasurer Jim Chalmers have been fielding criticisms of the changes during their nationwide campaign to spruik the budget.

Forty businesses signed an open letter saying the capital gains changes were an "aspiration ambush", while some concerns were raised from within their own party.

Chalmers told reporters yesterday there has been "misinformation" about the budget.

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"The four existing concessions and carve-outs for small business in the CGT system will remain, and people like our political opponents who want to make up things about our changes don't acknowledge that, but they should," he said.

The treasurer has also been reiterating that there is a one-year grace period before the CGT changes come into effect, consultation with the start-up sector and support for businesses who want to restructure their discretionary trust to a fixed trust.

The last time the capital gains tax was altered was when the Howard government introduced the 50 per cent discount.

Keating, in his statement, said Howard and his treasurer, Peter Costello, made a significant mistake by introducing the discount.

"Housing prices took off dramatically from the moment Howard and Costello introduced the 50 per cent discount in 1999," he said.

"Yet wealthy people are out there now arguing against the government's change notwithstanding the stark evidence of the price shock Howard and Costello induced."

Keating concluded his statement by saying the current government is seeking to arrest the distortion that has made housing unaffordable for an entire generation.

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