The Senate inquiry report into the capital gains tax discount adds to mounting evidence that the investor tax break is making Australia’s housing crisis worse, with social housing advocates warning the federal government can not afford to delay reform.
The report handed down on Tuesday highlighted that the CGT discount, in combination with negative gearing, is driving up home prices and worsening inequality, while foregoing much-needed revenue that could fund social housing.
The report also included warnings against grandfathering and carving out exclusions for different assets in the reforms, which would worsen inequity and weaken the impact on housing affordability.
Last month, Everybody’s Home analysis of organisation submissions to the inquiry found more than seven in 10 want the investor tax break to be abolished or reformed.
Around half of all organisation submissions supported or raised the idea of redirecting the billions in savings toward building affordable rentals.
Everybody’s Home, Australian Council of Social Service, Tenants’ Union of NSW and Better Renting said appetite for tax reform is growing and the government has no excuse not to act.
The groups are urging the government to wind back the capital gains tax discount and negative gearing, and use the billions in savings to build more public and community housing.
Everybody’s Home spokesperson Maiy Azize said: “The government is losing billions every year by lining the pockets of investors. It's driving up the cost of housing and everyday Australians are paying the price.
“More and more Australians are crying out to end unfair investor tax handouts. Reform can no longer wait, and there will never be a better moment. The government has the numbers, the evidence, and the support of voters to be bold. Inaction will make housing even harder to afford and widen the gap between the rich and everyone else.
“These investor tax breaks are making the housing crisis worse. It’s only fair they are scrapped and the billions saved are used to build rentals that Australians can actually afford and desperately need.”
ACOSS CEO Cassandra Goldie said: “This inquiry has highlighted clear evidence that the CGT discount and negative gearing are driving up home prices and supercharging inequality, all at enormous damage to the community and to the budget.
“The federal government spends over $20 billion each year on these tax breaks, which largely go to people on the highest incomes - while housing and financial stress worsen. That cannot be a fair or sensible use of public funds.
“With all the evidence before it, there is no excuse for the government to ignore the generational opportunity for reform in this budget. It must act to curb unfair tax arrangements like the CGT discount, negative gearing, and discretionary trusts, and invest the savings in essential services and supports like boosting social housing and income support.”
Tenants’ Union of NSW CEO Leo Patterson Ross said: “These proposed reforms are long overdue and a correction to an approach to owning property that is closer to gambling than keeping Australians safe in their homes. We have seen first hand the inequality of our housing system and the negative impact the capital gains tax discount has on housing affordability.
“Capital gains tax discount incentivises owner behaviour to prioritise the financial treatment of housing above its usage. Nearly half of rent spent in Australia is being used to pay for landlord borrowing as a result of these tax settings, while only 6% of rents paid are spent on repairs and maintenance.
“Australia deserves a fairer approach to keeping homes as well as funding new, genuinely affordable homes. We must see reforms to these tax discounts for an equitable, more stable renting experience.”
Better Renting CEO Angela Cartwright said: “The Albanese Government has the opportunity to take decisive action to support responsible, long-term investment in the provision of rental housing and improve housing stability and quality for the one-third of Australian households who rent.
“Better Renting hears from too many renters getting kicked out of their homes every year or two by landlords cashing in massive capital gains and selling out when the negative gearing benefits dry up. The current tax settings reward short-term, speculative investment, driving up house prices and parallel increases in rent, while discouraging landlords from maintaining - let alone improving - homes they need only hold for 12 months to score generous tax breaks on their super profits when they sell.
“Renters in Australia are sick and tired of paying too much for too little while watching people wealthy enough to own bonus homes get rewarded by government for contributing to rental housing precarity. The Albanese Government must abolish the capital gains tax discount and negative gearing in the May Budget to deliver a fair, affordable, and stable future for renters.”
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