Fact-check
FIRE post arguing the new CGT rules raise the portfolio needed for the same after-tax withdrawal
This post is a useful worked example, but it is highly assumption-sensitive. The Budget does replace the 50 per cent CGT discount with inflation indexation plus a 30 per cent minimum tax from 1 July 2027, and that can materially worsen after-tax withdrawal maths for long-horizon share investors. But the specific FIRE outputs here depend on hidden assumptions about the investor's marginal tax rate under the old system, the exact interaction of the 30 per cent floor with indexed gains, the cost-base method, and whether the 4 per cent rule is being applied pre-tax or post-tax. The directional point is strong; the precise portfolio jump from $1.5 million to $1.75 million is not automatic from the policy text alone.
3 requires assumptions
Prefills a post-2027 ETF-style savings case so the FIRE withdrawal and after-tax portfolio target claim can be pressure-tested against tax-rate and inflation assumptions.
Per-claim verification
requires assumptions 77% confidence
A typical FIRE-style withdrawal under the old system can be modelled as facing about a 12.5 per cent effective tax rate.
“the general consensus seems to be tax paid would be around 10-15% of your income. I will split the difference and say 12.5% tax.”
That may be a workable simplifying assumption for some portfolios, but it is not a generally established FIRE tax rule. The effective rate depends on cost base, discount eligibility, other taxable income, and how much of the withdrawal is capital gain versus principal.
Assumptions required
- Assumes a particular mix of embedded gains and cost base in the portfolio.
- Assumes a specific personal tax position rather than a general FIRE investor.
Alternative defensible framings
- Any old-system FIRE tax estimate needs an explicit cost-base and marginal-rate assumption.
requires assumptions 80% confidence
On the post's assumptions, a $60,000 annual share withdrawal would leave about $44,500 after tax under the new rules rather than about $52,500 under the old ones.
“your 60,000 withdrawal under the new rules would hypothetically net you about $44,500 after tax instead of $52,500 under the old rules.”
A materially worse after-tax withdrawal outcome is plausible under the new regime for a long-horizon share portfolio. But the exact net amounts depend on the portfolio's embedded gain, indexed cost base, inflation path, floor interaction, and the investor's personal tax treatment under the old system.
Assumptions required
- Assumes the post's 30-year return and inflation inputs are appropriate and internally consistent.
- Assumes the cost-base arithmetic and floor application are being computed correctly for the chosen withdrawal.
Alternative defensible framings
- The new regime can materially reduce after-tax FIRE withdrawals in some long-horizon share scenarios, but the exact net figure depends on disclosed inputs.
requires assumptions 79% confidence
Maintaining the same after-tax FIRE income under the new rules pushes the required portfolio from about $1.5 million to about $1.75 million.
“If you wanted to maintain an after-tax withdrawal rate of $52,500, you would need to withdraw approximately $70,000 per year. Making your FIRE target $1.75 million, instead of the old $1.5 million.”
That conclusion follows from the post's own assumed tax outputs, but those outputs are themselves assumption-heavy. The 4 per cent rule is also a heuristic rather than a tax-specific theorem, so treating the portfolio jump as a clean mechanical consequence overstates the certainty of the result.
Assumptions required
- Assumes the 4 per cent rule is the right baseline and is being applied consistently pre-tax versus post-tax.
- Assumes the post's after-tax withdrawal estimates are correct.
Alternative defensible framings
- On some FIRE-style assumptions, the new CGT regime can materially raise the portfolio needed to sustain the same after-tax withdrawal.