Labor urged to ‘scrap’ CGT discount on housing

The Greens are calling on the government to abolish the capital gains tax (CGT) discount in a move to help fix the housing crisis and provide “long overdue reform”.

In a statement released on Tuesday (22 July), senator Barbara Pocock and senator Nick McKim said the government was aware that this tax break was contributing to the housing crisis, but were “scared” to stand up to the property lobby and their “big donor mates”.

According to Pocock, if the government genuinely wanted to fix the housing crisis, scrapping CGT was essential.

“Let’s be clear – this is a tax break for wealthy property investors, a tax break which comes at a cost to first home buyers and owner occupiers. This is also a tax break that increases levels of homelessness, which have increased by 10 per cent under this government since it was elected in 2022,” she said.

“Massive tax breaks for wealthy property investors are cooking our housing system. Instead of everyone having a roof over their head, houses have become an investment asset class – which fuels intergenerational inequality.”

This sentiment was echoed by McKim, who said the CGT discount was “a gift to wealthy investors that’s helped turn housing into a speculative asset, rather than a human right”.

McKim said CGT was one of the most destructive tax concessions in the country as it drove up prices, fuel inequality and helped to shut an entire generation out of home ownership.

As reported by The Australian Financial Review, NSW Premier Chris Minns also backed taking a fresh look at tax breaks that disadvantaged first home buyers and encouraged the Albanese government to take a closer look at CGT.

Despite multiple figures calling on the government to completely scrap the 50 per cent CGT discount, industry professionals have said this approach was perhaps “too harsh”.

Peter Bembrick, tax partner at HLB Mann Judd, said he understood the standpoint to take a closer look at CGT and the way it operated, yet doesn’t believe it should be fully abolished, but rather reformed.

Speaking to Accountants Daily, Bembrick said the government did need to acknowledge that property was an issue in the economy and couldn’t ignore calls for some form of CGT review.

“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.”

Bembrick added that the CGT discount shouldn’t be fully “scrapped” as it was originally introduced to replace the complicated indexation method and would significantly impact foreign investment.

“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.”