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An analysis by the Parliamentary Budget Office, commissioned for a Senate inquiry, reveals that the 50 percent capital gains tax (CGT) discount is projected to cost the federal budget a staggering $247 billion over the next decade. This is a significant increase from the $21 billion expected for this financial year alone.
This figure surpasses the $205 billion spent on the concession since its inception in 1999 by the Howard government, under then-Treasurer Peter Costello.
The report highlights a disparity in the distribution of benefits from the CGT discount, noting that it is “highly skewed” in favor of higher-income earners. Indeed, Australia’s top 10 percent of earners reap approximately 82 percent of the total advantage provided by this policy.
Within this elite group, the top one percent enjoy nearly 60 percent of the savings. This concentration of benefits among the wealthiest has sparked debate over the policy’s impact on economic equality.
Greens Senator Nick McKim, who is spearheading the inquiry, argues that the CGT discount is exacerbating housing market pressures by inflating property prices, thereby further complicating the path to homeownership for renters.
“The evidence keeps piling up against the most unfair tax rort in the country. Every time you crunch the numbers, it just gets worse,” he said.
“The capital gains tax discount has blown out into a quarter-trillion-dollar joke that overwhelmingly favours the super-wealthy, who have had it far too good for far too long.
“Labor cannot keep talking about a fair go for workers and fixing intergenerational inequality while defending the most unfair tax break on the books.”
Speculation is growing about whether the government will overhaul the CGT discount for investment properties as the centrepiece of the May 12 federal budget, as more Australians are priced out of the housing market and some groups back scaling back the reductions.
The Australian Financial Review has reported the federal government is considering significant tax reform ahead of the federal budget in May, a claim that senior Labor figures have not categorically ruled out this week.
Treasurer Jim Chalmers has said the government is focused on tackling intergenerational inequality.
The Albanese government had previously steered clear of making changes to tax concessions for investment property owners, with Labor having lost the 2019 election after campaigning for a reduction to the CGT discount and negative gearing.
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