Labor is considering changes to the capital gains tax (CGT) discount, a policy that has long been blamed for inflating property prices and locking first-time buyers out of the market. With a commanding majority in parliament, a fractured opposition, and the Greens eager to support reform, the government sees a rare opportunity to act on housing affordability.
The 50% CGT discount, introduced by the Howard government in 1999, applies to assets held for more than 12 months. Critics argue it has turned housing into a speculative investment for the wealthy, disadvantaging owner-occupiers. The discount was originally intended to encourage business investment, not property speculation.
Labor previously took the policy to the 2016 and 2019 elections under Bill Shorten, but lost both times. Now, with Anthony Albanese holding a strong majority and the opposition in disarray, the political landscape has shifted. Treasurer Jim Chalmers has indicated the government is open to major tax reform ahead of the May budget, citing intergenerational inequity as a key concern.
The Parliamentary Budget Office estimates the CGT discount will cost nearly $250bn over the next decade, disproportionately benefiting high-income earners and retirees. The Grattan Institute has proposed halving the discount to 25%, phased in over five years, which could raise $6.5bn annually and reduce property prices by less than 1%.
Defence Minister Richard Marles this week announced the sale of over 60 Defence properties, including the Maribyrnong munitions site in Melbourne, which could accommodate up to 6,000 homes. However, he stressed that maximising financial value, not housing, was the primary goal. The Greens have launched a parliamentary inquiry to pressure Labor on CGT reform, with expert testimony expected in the coming weeks.
