Capital gains tax discount to cost Australia $250bn over next decade with retirees and high-income earners to benefit most | Tax

Australia’s capital gains tax cut will cost around $250 billion over the next decade; more than double what this franchise has cost in its 25-year history.

While the federal government is considering reducing the 50 per cent discount to help first home buyers, new figures from the Parliamentary Budget Office show the discount has cost the budget $205 billion in lost revenue since it was introduced in 1999.

But Australia’s rising property prices and other investor demands will push the total price tag to $247 billion over the next 10 years.

The figures, commissioned by the Greens as part of a pressure campaign on Labor to roll back the Howard-era cut, show the top 1 per cent of taxpayers will receive around 60 per cent of the benefit this financial year.

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Retirees with no taxable income and those making more than $362,900 were the biggest beneficiaries, according to the PBO analysis.

A 50% capital gains tax relief applies to all investments held for more than 12 months. This law, introduced by the Howard government in 1999, along with its negative gearing rules, was accused of promoting housing as an investment mechanism for wealthier Australians over the rights of would-be property owners.

Federal Labor went to the 2016 and 2019 elections promising to reduce the discount, but was defeated by the Coalition in both.

The Federal Treasury modeled changes to negative gearing rules in 2024 and found that reducing CGT deductions for investors would have a greater impact on reducing house prices, but neither policy would help increase housing supply.

Senior Labor figures have left open the possibility of changes to the CGT in the May federal budget; It’s a move the Greens will support as part of efforts to boost home ownership.

But on Thursday cabinet ministers stressed there was no change in Labor’s policy yet.

Finance Minister Jim Chalmers told Guardian Australia last week he was “open” to big ideas on tax reform and would take a laser-focused approach to generational inequality in Labor’s second term.

It’s unclear whether the new rules will be limited to real estate investors. Labor could also make changes to make the discount less generous or introduce a tiered model.

Greens senator Nick McKim is chairing a parliamentary inquiry into CGT regulations that is expected to recommend less generous rules for property investors.

“Evidence continues to accumulate against some of the most unfair tax fraud in the country,” he said.

“Every time you crunch the numbers it gets worse.

“Rather than supporting productive investment, the CGT rebate is now largely used to subsidize speculation on existing properties.
prices and makes homeownership more difficult for tenants.”

McKim challenged Labor to fix the CGT as part of its promise to tackle generational inequality in the Australian economy.

Last month, the NSW Treasury said current CGT rules were driving up property prices and harming housing affordability, warning that the relief was benefiting wealthy investors at the expense of first-time buyers.

The report said CGT and other tax concessions “negatively impact incentives for property investment” and undercut policies including first home buyer aid.

Wentworth MP Allegra Spending, who led the development of an independent tax white paper in the last parliament, called for the CGT changes to be considered.

“I’m glad the Treasurer is open to reform, but changing a tax cannot address generational inequality or housing affordability,” he said. “Tax changes should be revenue neutral, with increases balanced by decreases.”

Research from the Grattan Institute suggests ending CGT relief without complying with the new rules could be worth as much as $6.5 billion a year.

The Greens-led CGT inquiry will hold hearings later this month before a final report is due on March 17.