Property industry bodies warn against CGT changes

The warnings came amid reports Labor was considering slashing the tax benefit ahead of the May budget, as unions heap pressure on the government and a Senate committee examines the matter.

The Housing Industry Association (HIA) has warned the government against changes to CGT in the federal budget, including increases to the tax rate.

HIA managing director Jocelyn Martin said housing was already one of the most heavily taxed sectors in the economy, and that the proposed changes would increase barriers to building new homes.

“Further tax changes, including to negative gearing or capital gains tax, would undermine investment, reduce feasibility, and worsen affordability,” she said.

Similarly, the Property Council of Australia said that it was yet to be seen how potential CGT increases on investment homes would increase the supply of new housing, especially rental stock.

“If theoretical CGT hikes in fact end up reducing supply, they will also begin to reduce state stamp duty revenues in a market that may well already be cooling thanks to a sticky inflation outlook,” it said.

“Budget repair for the Feds at the expense of fragile state budgets.”

Last week, Property Council chief executive Mike Zorbas said productivity reform would be key to building more homes and commercial assets, therefore lifting investment and confidence.

“A stocktake of the existing regulatory burden, a plan to cut duplicative rules and a pro-investment mindset is a healthy start,” he said.

The remarks came as new data revealed the bulk of the $24 billion tax benefit has gone to wealthy Australians.

An Anglicare Australia report showed that more than 80 per cent of the benefit of the CGT discount for investors went to the wealthiest 20 per cent of households.

According to the Rebalancing Capital Gains Tax report, only two per cent of the discount went to the bottom 20 per cent of households.

In addition, Oxfam Australia data released in October showed almost 50 per cent of the CGT discount went to just 24,000 people who earned over $1 million in 2022–23.

It showed that, on average, each of the individuals gained about $271,000 from the CGT discount on profits from the sale of assets and investments,

Oxfam said the sum was nearly 1,500 times the benefit an average worker received.

According to the company, scrapping the capital gains discount could restore around $22.7 billion to the federal budget each year.

Jennifer Tierney, Oxfam chief executive, said that findings showed that the nation’s tax system is deepening the inequality crisis by providing significant tax breaks to the wealthiest Australians.

This tax break overwhelmingly benefits a tiny group of already wealthy individuals, while ordinary workers pay tax on every dollar they earn,” she said.

“Ending the discount is one of the simplest and fairest ways to restore integrity and balance to our tax system,” she concluded.