The Select Committee on the Operation of the Capital Gains Tax Discount was established last month and will be reporting on its contribution to inequality and housing issues in Australia.

Submissions are open until 19 December and we encourage our members to contribute.

Reform of the CGT discount regime has been a priority for National Shelter and the Shelter network across jurisdictions since its inception over 25 years ago.

Capital gains overwhelmingly flow to very wealthy households, who tend to build wealth from assets and investments whereas low- and moderate-income households do so from labour. The fact that in a country that prides itself on hard work and a ‘fair go’, capital gains have been taxed at half the rate of other income. I.e. labour, for over 25 years remains a policy conundrum worth reforming.

 While there needs to be a method to ensure tax is collected in real terms (i.e. considering inflation between asset acquisition and realisation of the capital gain), the current CGT discount is far too ‘generous’. When it comes to housing, it has now undoubtedly created an incredibly unfair system to prospective first home buyers and others compared to established homeowners and property speculators. And it is clear that it has artificially inflated housing asset prices and incentivised investment in housing at the expense of other asset classes, impacting housing affordability, inequality, economic productivity and social cohesion.

It’s time for the Australian Government to admit what is clear for both experts and common folk; capital gains tax discounts are unfair and in urgent need of reform. Shelter NSW strongly welcomes this inquiry and will be contributing to a submission with its interstate counterparts through National Shelter, highlighting the severe impacts of the CGT discount on inequality and housing affordability, and calling for fair, measured reform.