Wealthy Australians are benefiting significantly from a staggering $19 billion tax break, raising serious concerns about housing equity and affordability in the country. Prime Minister Anthony Albanese is facing increasing calls to eliminate capital gains tax (CGT) discounts on housing, which many argue are distorting the market and making homeownership more elusive for everyday citizens. Recent housing data has unveiled that a whopping 80 percent of a $24 billion tax advantage is pocketed by affluent Australians, leaving renters grappling with soaring costs.
This revelation follows a report released by Anglicare Australia, which highlights that over 80 percent of the advantages granted through the capital gains tax discount for investors primarily benefit the wealthiest 20 percent of households, while a mere two percent trickles down to the lowest 20 percent. Kasy Chambers, the executive director of Anglicare Australia, emphasized that the time has come to confront this issue head-on, noting, "There’s never been more public support for action, and housing costs—both rents and property prices—are at an all-time high. This is the perfect moment to address it directly."
The accompanying table from the report illustrates the staggering benefits received by different income groups in billions of dollars for the fiscal year 2022-23. According to Ms. Chambers, the introduction of CGT discounts has coincided with a troubling increase in rental prices. She pointed out that the rise in weekly asking rents over the past 25 years substantiates her claims, as does Anglicare Australia’s annual Rental Affordability Snapshot, which indicates worsening affordability year after year. "If the justification for these tax breaks is that they help keep rents low, the evidence suggests that this strategy has been failing for decades," she remarked.
The report further revealed that the capital gains tax discount, especially when coupled with negative gearing, has transformed housing into a speculative investment arena. This shift has led to inflated property prices and rents, while the majority of the benefits disproportionately accrue to existing property owners. In fact, the analysis for the fiscal year 2022-23 shows that the capital gains tax discount alone cost the federal budget an astounding $23.7 billion, with over 80 percent of this amount directed to the wealthiest 20 percent of households.
To put this into perspective, the wealthiest segment received more than $19 billion from the capital gains tax discount and an additional $20.64 billion from the principal place of residence exemption. In stark contrast, the bottom 20 percent of households saw only $0.47 billion from the CGT discount and $3.36 billion from the principal place exemption.
Ms. Chambers stressed that the implications of the CGT discount cannot be viewed in isolation, as its most significant effects arise when paired with negative gearing. Together, these policies create a compelling incentive for investors to focus on property primarily for capital growth rather than rental income, encouraging them to drive up housing prices. Investors feel emboldened to bid aggressively, knowing they can offset any losses against their income and will face minimal taxation on eventual profits.
This dynamic places investors at an advantage over owner-occupiers, particularly first-time homebuyers. Those who can leverage these tax incentives often outbid individuals looking for homes to live in, consequently pushing prices higher and further entrenching unaffordability in the housing market.
According to Ms. Chambers, this set of policies tends to concentrate housing wealth in the hands of those who already possess assets. "Households that have existing properties are in a better position to acquire more, benefiting from rising prices and cumulative gains. In contrast, renters find themselves vulnerable to escalating rents, increased insecurity, and a lack of opportunity to build housing wealth."
The report highlights that tax concessions favoring high-income households currently impose a far greater cost on taxpayers than income support payments for low-income individuals. In the fiscal year 2022-23, major tax concessions, including the CGT discount, negative gearing, and superannuation tax breaks, are estimated to have cost around $128 billion—compared to approximately $76 billion spent on the Age Pension and welfare assistance for working-age individuals combined.
"Housing should be regarded as essential infrastructure rather than merely a tax-advantaged asset," Ms. Chambers asserted. Anglicare has called for reforms to the capital gains tax discount alongside other housing tax regulations, advocating for revenue generated to be redirected toward public and community housing initiatives to increase supply and alleviate pressure on the private rental sector. "We welcome news of the government considering tax changes in the upcoming Budget," she added, expressing hope for progressive policy shifts.
Anglicare supports a gradual phase-out of CGT discounts over time, emphasizing the need for a fairer and more equitable housing landscape.
