Prime Minister Anthony Albanese sees growing support for removing CGT discounts on homes that are helping to distort the market. Photo: Hilary Wardhaugh/Getty Images.
A $23.7 billion tax break is blamed for fueling Australia’s housing crisis, with 80 per cent of its benefits ($19bn) going to wealthy Aussies, shutting out renters and first home buyers.
Anglicare Australia’s report – out on Tuesday – found more than 80 per cent of the benefit of the capital gains tax rebate for investors flowed to the richest 20 per cent of households, while just 2 per cent flowed to the bottom 20 per cent – “a stark illustration of how the tax system redistributes public resources at the top, supporting the accumulation of wealth at the bottom who do little”.
Anglicare Australia chief executive Kasy Chambers told the Courier-Mail “now is the right time to tackle this issue. There has never been more public support, and housing costs – both tax and house prices – have never been higher. This is the time to tackle it head on.”
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This table shows the benefits received by the state in billions of dollars in revenue for 2022-23. Source: Anglicare Australia.
He also dismissed claims that CGT rebates were keeping rents down.
“Rents have been rising steadily since the introduction of the CGT rebate. This is evidenced by the increase in weekly asking rents over the past 25 years, and Anglicare Australia’s Rental Affordability Snapshot, which shows that affordability has worsened year on year,” Ms Chambers said. “If the argument is that these tax breaks reduce rents, the evidence shows that this approach has been failing for decades.”
The Anglicare report found the huge profits tax cut, especially when combined with bad gear, turned housing into an investment game, driving up house prices and rents while bringing huge benefits to people who already own property.
It showed the capital gains tax cut alone would cost the federal budget $23.7 billion in 2022-23, with more than 80 percent of that flowing to the richest 20 percent of households.
Its analysis of 2022-23 data found that the wealthiest 20 percent of households received the lion’s share of housing-related tax breaks — more than $19 billion in capital gains tax credits and $20.64 billion in primary residences.
In contrast, the bottom 20 per cent of households received just £0.47 billion in CGT relief and £3.36 billion from principal.
Ms Chambers said “the impact of the CGT discount cannot be understood in isolation. Its most powerful effects come when we work in conjunction with negative gearing.”
“Together, these policies create a powerful incentive to invest in the area not just for rent, but for capital growth.”
He said investors are encouraged to bid up real estate prices, hoping that any losses incurred along the way can be offset against their earnings, and the gains will ultimately be taxed less.
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Anglicare Australia Chief Executive Kasy Chambers
“This benefits investors more than owners, especially first-time home buyers. Investors who can take advantage of tax breaks are able to outbid people looking for a home to live in, drive up prices and lock more people out of homeownership altogether.”
Ms. Chambers said these policies focus housing wealth on those who already own property.
“Households that already own properties are in a better position to acquire additional properties, benefiting from rising prices and compounding benefits. Those who rent are left exposed to higher rents, greater insecurity, and no opportunity to build housing wealth.”
The report said tax deals that benefit high-income families now cost more taxpayer money than income support payments for low-income people.
In 2022-23, major tax deals including capital gains tax relief, negative gearing, and more than a year’s tax break cost an estimated $128 billion, compared to about $76 billion spent on the Age Pension and working-age social security payments combined.
“Housing should be treated as an important infrastructure, not a taxable asset,” said Ms. Chambers.
Anglicare has called for capital gains tax relief to be reformed and other property tax settings, and for revenue to be redirected to social and public housing to increase supply and ease pressure on the private rental market. “We are encouraged to hear that the government is considering tax changes in the next Budget,” said Ms Chambers.
Anglicare supports phasing out CGT discounts in full over time.
Anglicare Australia recommendations:
“Anglicare Australia recommends that the Australian Government remove the capital gains tax rebate and negative gearing. These changes should be introduced gradually to avoid market disruption, but quickly, to eliminate the use of the tax system to underwrite speculative investment in housing. Removing these concessions will reduce upward pressure on house prices, improve equity in the tax system, and help to stabilize the economy and reduce housing insecurity.”
