Greens double down on call to slash CGT ahead of MYEFO

As the Albanese government’s mid-year economic and fiscal outlook is set to be released this month, the Greens are doubling down on their opposition to the capital gains tax (CGT) discount.

The Greens have once again stated they were urging Labor to wind back tax handouts “for rich property investors” at the upcoming mini budget, and said fixing the CGT handout would help bring soaring housing prices under control, and be a “massive Christmas gift for renters and first homebuyers”.

The call comes after the political party secured two Senate inquiries aimed at putting the “unfair tax handout in the firing line” by focusing on intergenerational housing inequality in Australia, as well as the CGT discount itself.

The upcoming mid-year economic and fiscal outlook (MYEFO) will provide updated information on the government’s fiscal position and compare estimated expenditure to actual expenditure.

The mini budget would also include estimates on any government decisions made since the previous budget, and would affect expenses, revenues and capital estimates.

Treasurer Jim Chalmers said the MYEFO was set to update the budgetary position, including budget aggregates, by incorporating any changes to economic parameters.

Chalmers also noted that this upcoming MYEFO may be one “forcing hard choices”.

Larissa Waters, Greens leader and climate spokesperson, said the party believed there was no excuse for winding back support for everyday people while leaving wealthy investors untouched.

“Wealthy property investors get a leg-up from the government at auction, which supercharges house prices and locks first renters and homebuyers out,” she said.

“Labor must use next week’s mini budget to announce that the free ride for wealthy property investors is over.”

As this issue and standpoint taken by the Greens have been previously reported by Accounting Times, many readers have expressed their views on the matter, both in agreement and disagreement.

One Accounting Times reader said: “Remove negative gearing, CGT discounts and incentivise investors with generous tax breaks and less stamp duty, if the property is used as an investment and is available for rent for at least five years. Supply problem would be solved”.

While another reader said: “If the CGT discount is removed, this would probably lead to a temporary dip in the market as investors rush to exit before the implementation date, but then new housing supply would grind to a halt and prices would rise again as a result. And rent would rise because of how many investors exited the market.”

Since first being raised by the Greens, the issue has received mixed feedback from members and professionals within the tax community.

When first brought to light, Peter Bembrick, HLB Mann Judd tax partner, told Accounting Times that the government could not ignore the growing issues in the property sector as well as the CGT discount, but said he didn’t entirely agree with the Greens’ call to scrap it altogether.

“I’m not saying that I believe there should be changes, but it would probably be a bit naïve or simplistic just to push back on any proposed change and stick with what we’ve currently got,” he said.

“I think it is certainly worth looking at, but I would recommend for everyone to defer to property experts to come up with and propose different models that would be effective and beneficial.”

“In principle, simply removing the discount and not providing anything by way of compensation would seem to be a bit harsh. If you simply abolish the CGT discount for all investments, then you definitely disadvantage a lot of investors, and perhaps, certainly reduce the incentive for long term investment assets.”

The Greens shared they were of the strong opinion that the CGT discount was “turbo-charging” wealth inequality and intergenerational inequity, as 50 per cent of the benefit went to the top one per cent of income earners, and 71 per cent of the benefit went to people over 50.

Senator Nick McKim, Greens Treasury spokesperson, said the CGT discount meant that people who worked to earn a living were paying twice the tax as someone meaning the same money flipping investment properties.

“Labor can’t continue to hand over billions in tax breaks for wealthy property investors that are locking first home buyers out of the market, then claim at MYEFO that there’s no money to help renters,” he said.

“There’s no better time to commit to change. Ending the era of property hoarding would help renters, first homebuyers and the national budget.”