Should Australia Change How Capital Gains Tax Works on Property?
Q: What is this new idea about Capital Gains Tax (CGT)?
A: A new report from the McKell Institute suggests changing how CGT is applied to property to help fix Australia’s housing shortage and improve affordability.
Q: What exactly is being proposed?
A: The plan includes:
⦁ 70% CGT discount for new attached homes (like units/apartments)
⦁ 50% CGT discount for new detached homes (like houses) and existing investments
⦁ 35% CGT discount for existing detached homes
Q: Why are they suggesting these changes?
A: The goal is to encourage more investment in new housing, rather than just buying and selling existing homes. This would help increase housing supply and make renting and buying more affordable.
Q: Who wrote the report?
A: The paper was written by Professor Richard Holden and Edward Cavanough, the CEO of the McKell Institute.
Q: What problem are they trying to solve?
A: Australia is struggling to build enough homes. The current tax rules make it more attractive to invest in existing homes instead of building new ones. That slows down new housing supply.
Q: How many new homes does Australia need?
A: The goal is to build 1.2 million homes by 2030. This new tax idea could help deliver an extra 130,000 homes toward that target.
Q: Will this plan cost the government money?
A: No — it’s designed to be revenue-neutral within 5 years, and could bring in $1.4 billion extra over 10 years.
Q: Who benefits from this idea?
A: According to the report, it would benefit:
⦁ First home buyers
⦁ Renters
⦁ Mum and dad investors
⦁ Taxpayers, by using tax discounts in a smarter way
Q: Why hasn’t CGT reform happened before?
A: Previous efforts to change CGT have failed due to political pushback. The McKell Institute says it’s time for a fresh approach that focuses on practical results, not politics.
Q: What’s the bottom line?
A: The authors argue that CGT should encourage building new homes, not just trading old ones. A small change could make a big difference in solving Australia’s housing crisis.