CGT reform key to more ‘just, compassionate society’, op shop says

St Vincent de Paul Society (Vinnies) has urged the government to reform the capital gains tax (CGT) discount to create a fairer and more equitable environment for those experiencing housing stress, poverty and financial insecurity.

According to the charity, it believed the CGT discount in its current form no longer reflected economic reality and contributed to the inequality and housing pressures experienced by many of the people the charity supported.

Further, Vinnies said it believed reform to be necessary to improve the efficiency and integrity of the tax system and ensure Australia’s fiscal settings supported a more “just and compassionate society".

Vinnies said it had contributed to the CGT conversation based on its experiences with people enduring housing stress, poverty and financial insecurity.

“These experiences provide a practical lens through which we assess the effects of current tax settings on inequality, housing affordability and the wellbeing of low-income households,” the charity said.

“Our heritage calls on governments to shape economic policy in ways that promote fairness and allow all people to participate fully in society. For these reasons, the society (Vinnies) has long advocated for tax settings that contribute to a more equitable distribution of resources and, importantly, to a housing system that is accessible, affordable and stable.”

In general terms, the charity said it was aligned with the ACOSS position, which supported a gradual reduction of the CGT discount to 25 per cent for individuals, trusts and superannuation funds, implemented over a five-year period to avoid market disruption and to protect renters.

Vinnies outlined housing remained “one of the clearest” areas in which the impacts of the CGT discount were felt, and said its members and volunteers witnessed daily the strain it had on Australians.

This strain witnessed by the charity was linked to renters, single parents, older people and low-income households as they struggled with rising house costs and insufficient supply.

“Current tax settings add to these pressures. The CGT discount and negative gearing together amplify investor demand for established homes, often placing investors in direct competition with first-home buyers. This pattern boosts prices without increasing the supply of new housing,” Vinnies said.

“Research shows that the CGT discount overwhelmingly benefits high-wealth individuals, with around 80 per cent of the total value flowing to the top income decile.”

“This concentration of benefits contributes to widening wealth gaps between owners and renters and reinforces intergenerational disparities in access to housing.”

The charity believed reducing the CGT discount would not solve the housing supply or affordability on its own, but would remove a distortion in demand, mainly for existing properties, and help create a fairer tax environment in which more sustainable reforms could take effect.

In a submission to the government, Vinnies also noted a reduction of the CGT rate would benefit other key areas such as investment and productivity, distributional impacts and the role of trusts.

In addition to gradually reducing the CGT discount to 25 per cent over five years, Vinnies suggested curbing avoidance practices, pairing CGT changes with broader housing reforms, putting revenue gains from reform towards social and affordable housing and ensuring tax reform delivered meaningful social benefit.

“Taken together, these measures would help restore fairness to the tax system, moderate speculative demand, and support a broader policy framework aimed at improving housing accessibility and reducing poverty,” Vinnies said.

“The society remains committed to contributing constructively to reforms that reduce poverty, improve housing outcomes and strengthen social cohesion.”