CGT debate shows why governments need policy modelling

Part 1 in a two-part series on modelling budget changes

Summary:  The recent CGT reforms have sparked debate about fairness, investment and economic impact. But they also highlight a government capability challenge: how do policymakers test, explain and scrutinise complex tax reforms? This article explores how Rules as Code and policy modelling could make major tax changes like the current CGT changes more transparent, testable and evidence-driven.

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Date:
29 May 2026
Author:
Phillipa Martin
 
Phillipa is Salsa’s Rules as Code Practice Lead and business analyst.

Rules as Code for Capital Gains Tax modelling

Few Budget measures spark debate like Capital Gains Tax reform.

The recent changes — replacing the long-standing 50% CGT discount with an inflation-based indexation model and a 30% minimum tax on gains — have triggered strong reactions across politics, business, property and the startup sector.

Supporters argue the reforms improve fairness and reduce distortions. Critics warn about impacts on investment, entrepreneurship and long-term savings.

But beneath the policy debate sits another question:

  • How do governments actually test, explain and scrutinise reforms that are this complex?

When a change affects investors, founders, property owners and future tax decisions, a handful of examples and a Budget fact sheet may not be enough.

Enter Rules as Code, and policy modelling using OpenFiscaExternal Link simulations. This is currently being used around the world. Below you can see some real-life use cases.

See policy modelling in action around the world

The CGT debate is also a modelling problem

The current debate is full of competing claims.

  • Will investors pay more tax overall?
  • Will some taxpayers benefit because only inflation-adjusted gains are taxed?
  • How will the reforms affect startup founders, small businesses or long-term asset holders?
  • How sensitive are the outcomes to inflation over time?

These are not just political questions. They’re modelling questions.

Yet public debate often relies on:

  • Selected examples
  • Headline costings
  • Stakeholder analysis using different assumptions
  • Media interpretation

That makes meaningful comparison difficult. Two people can look at the same reform and reach very different conclusions.

Static examples are struggling to keep up

Modern tax reforms are increasingly difficult to explain through static documents alone.

A reform such as the new CGT model introduces multiple moving parts:

  • Inflation indexation
  • Minimum tax settings
  • Transition arrangements
  • Different asset types
  • Different holding periods
  • Interactions across taxpayer structures

These types of complexities matter.

A long-term investor may experience the reform very differently from someone holding an asset for only a few years. A startup founder may see different outcomes from a property investor. Inflation assumptions may materially change the final tax position.

Traditional communication tools struggle to capture this nuance.

Governments typically publish a limited number of examples designed to explain the reform simply. But simplification can also create confusion, particularly when stakeholders begin testing the policy against real-world scenarios.

What if people could test the rules directly?

This is where Rules as Code and policy modelling tools such as OpenFiscaExternal Link become interesting.

Imagine the CGT reforms existed as an executable policy model, a digital policy twin.

Instead of relying on static examples, policymakers, Parliament, journalists and citizens could quickly and easily compare:

  • Current 50% discount rules
  • Proposed indexation and minimum tax rules
  • Different holding periods
  • Different inflation environments
  • Different taxpayer profiles and asset types

People could test practical questions such as:

  • What changes for a long-term share investor?
  • How does this affect an investment property held for ten years?
  • What happens to a startup founder with a low cost base?
  • How sensitive are outcomes to inflation over time?

It wouldn’t remove disagreement, but it would create a more transparent debate built around a shared representation of the rules.

See the examples above to try out policy modelling with OpenFisca.

The bigger lesson from the CGT debate

Whether people support or oppose the recent CGT reforms, the debate reveals something important about modern policymaking.

Tax policy is becoming too complex for static PDFs, selected examples and late-stage interpretation alone.

Governments increasingly need ways to:

  • Test reforms before legislation
  • Explain impacts more clearly
  • Support stronger Parliamentary scrutiny
  • Identify unintended consequences earlier

Rules as Code can’t solve political disagreement, but policy modelling tools such as OpenFisca offer a practical way to make complex reforms more transparent, testable and easier to scrutinise.

The real question raised by the CGT debate is not simply whether this reform is the right one. It’s whether governments have the tools to properly understand — and demonstrate — reforms of this complexity before they become law.

Imagine an Australian version of PolicyEngine, where the CGT reforms could be modelled, just like the primary candidate’s policies during the 2024 US election.External Link

Salsa Digital’s take

The CGT debate shows why governments need better ways to test and communicate complex policy changes. Rules as Code offers a practical way forward. By modelling policy via coded rules, governments can validate proposals earlier, improve transparency and strengthen implementation.

At Salsa Digital, we help governments explore practical applications of Rules as Code, policy modelling and executable legislation. We’d love to see a future Australia where policy changes can be modelled at all stages of the policy lifecycle. The tools are there, ready and waiting!