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Labor has given another sign it will change the capital gains tax discount and negative gearing at the May budget, after two government senators endorsed a Senate committee’s finding that the tax concessions skewed the housing market towards investors rather than young people.
But the Labor senators, Tasmanian Richard Dowling and West Australian Ellie Whiteaker, stopped short of spelling out what changes should be made, while the Greens leading the inquiry said capital gains tax concessions should be abolished for investment properties as part of a broader overhaul.
Liberal senators Andrew Bragg and Dave Sharma, who also served on the inquiry, rejected the report’s recommendations and issued a dissenting report that argued the “abolition of the CGT discount would discourage new construction, undermine supply, and so push housing prices up”.
The release of the report comes as the Albanese government considers winding back the 50 per cent capital gains tax discount, potentially to 33 per cent or 25 per cent, and placing a cap on the number of homes a person can negatively gear.
The May budget could also wind back generous tax breaks for people who lease electric vehicles.
Labor originally opposed holding the Senate inquiry into the capital gains tax discount, but it proceeded after the Coalition and the Greens voted to support it.
In the final report, Labor’s two senators endorsed the committee’s finding that “concessions provided by the capital gains tax discount, in combination with negative gearing, have skewed the ownership of housing away from owner-occupiers and towards investors”.
Greens Senator Nick McKim, who led the inquiry, argued the current tax system was terrible for young people, and said the report marked the “first time since 2019 that Labor has acknowledged the fundamental unfairness of the CGT discount, including its contribution to the housing crisis, wealth inequality and intergenerational equity”.
“The combination of negative gearing and the capital gains tax discount has driven rampant property speculation and inflated house prices over the last 26 years. This interaction has been cataclysmic for housing affordability,” he said.
Dowling and Whiteaker, in additional and separate remarks to the committee’s central findings, argued that changes to tax policy were one way to influence housing shortages.
However, they said extra housing supply, state planning systems, infrastructure provision, and construction capacity were also important, in carefully worded additional comments that reflect the delicate state of discussions about possible changes to CGT around the cabinet table.
“Younger Australians increasingly face different economic circumstances to previous generations, particularly in relation to housing and wealth accumulation,” they said.
“The work of this committee and the evidence it has heard should be considered, alongside other advice and analysis, as part of the government’s ongoing consideration of tax policy and potential future reforms in the context of future budgets.”
Asked about the report on Tuesday, Treasurer Jim Chalmers said the report’s findings would be considered but “these decisions ultimately get taken by the cabinet, not by parliamentary committees”.
The dissenting Liberal report argued that any proposal to weaken or abolish the CGT discount would “not materially improve housing affordability, would reduce the rental stock supply and raise rents, and discourage investment and new construction”.
The Coalition senators also claimed the real reason Labor wanted to reduce the CGT discount appeared to be the “attempted replacement of mum-and-dad investors with institutional landlords, which is frankly un-Australian”.
