Australia's capital gains tax (CGT) discount is projected to cost nearly $250 billion over the next decade, more than double the total revenue lost since its introduction in 1999, according to new figures from the Parliamentary Budget Office (PBO). The 50% discount on investments held longer than 12 months has already cost $205 billion in forgone revenue over 25 years.
The PBO analysis, commissioned by the Greens, reveals that the top 1% of taxpayers will receive nearly 60% of the benefit this financial year. Retirees without taxable income and those earning over $362,900 are the biggest beneficiaries. The discount, introduced by the Howard government in 1999, has been criticised for fuelling housing speculation and worsening affordability.
Federal Labor previously proposed scaling back the discount in 2016 and 2019 but lost both elections. Treasurer Jim Chalmers has indicated openness to tax reform, focusing on intergenerational inequity. However, cabinet ministers stressed no policy changes have been made yet. Options include limiting the discount to property investors, grandfathering existing arrangements, or introducing a tiered model.
Greens senator Nick McKim, chairing a parliamentary inquiry into CGT, described the discount as "the most unfair tax rort in the country." He urged Labor to address it as part of tackling intergenerational inequality. The NSW Treasury also warned that CGT and negative gearing skew incentives towards property investment, undermining first-home buyer assistance.
The Grattan Institute estimates ending the CGT discount without grandfathering could raise $6.5 billion annually. The Greens-led inquiry is due to report by 17 March, with hearings later this month.
