Greens launch Senate inquiry into ‘unfair and unequal’ CGT discount

On Tuesday (4 November), the Greens announced they had secured a Senate inquiry into the capital gains tax (CGT) discount to delve into the tax discount’s impact on Australia’s housing market and productivity.

“The CGT discount is the most unfair and unequal tax break in the entire Commonwealth tax code, which is supercharging house prices and locking first homebuyers out,” Greens senator Nick McKim said in a statement.

“This inquiry will shine a light on how the CGT discount has supercharged inequality, funnelled money away from productive investment, and turned homes into financial assets instead of places of shelter and community.”

The 50 per cent CGT discount applies to assets held for over a year. It was introduced in the late 1990s to replace the more complex CGT cost base indexing, which ensured that asset-holders were not taxed for gains caused purely by inflation.

Tim Sandow, BDO corporate and international tax partner and president of The Tax Institute, previously told Accounting Times the 50 per cent CGT discount was “fairly generous” in the current low-inflation environment, and noted that moving back to an indexation model could lead to fairer outcomes.

Economists from the e61 Institute found that the capital gains tax discount has driven “substantial horizontal and vertical inequity” amongst Australia’s highest earners.

For the top 5 per cent of Australian earners, who account for approximately 37 per cent of tax revenue, income bears “almost no relationship” with their effective tax rate, the economists found. A primary driver of this disparity was the CGT discount.

“Above the 93rd percentile, the capital gains discount becomes the largest driver of the difference in income tax rates between individuals with similar incomes,” the e61 Institute said.

The economists added that Australia’s current tax settings were “highly inefficient” and risked exacerbating Australia’s productivity issues, as it incentivised investments in less productive areas such as real estate.

“Australia’s taxation of higher incomes exhibits substantial horizontal and vertical inequity and as a result is highly inefficient,” the e61 Institute said.

“These differences incentivise individuals to organise their careers so as to generate income from activities that are taxed more generously. In general, these are not the same activities that would maximise productive efficiency.”

The Greens also argued that the CGT discount had worsened Australia’s housing crisis by incentivising speculative investment in property, and added that it was regressive, largely benefiting wealthier Australians.

“PBO [Parliamentary Budget Office] analysis commissioned by the Greens show that 50 per cent of the benefits of the CGT discount go to the richest 1 per cent of income earners. This unfair tax break is fuelling the housing crisis by turbocharging speculative investment while locking renters and young people out of home ownership,” McKim said.

“The Greens will use this inquiry to make the case for fairness: that someone who goes to work every day to earn a living should not be subsidising tax breaks for property speculators.”

The CGT inquiry is set to conclude in mid-March 2026, the Greens said.