Investors who live in the wealthy electorate of Wentworth in Sydney’s eastern suburbs claimed about $1.8bn from the 50% capital gains tax discount, according to new research. It reveals how a handful of rich enclaves in Australia’s two biggest cities account for a fifth of the annual benefit from the tax break.
The Australian Council of Social Services is lobbying for a halving of the CGT discount and has used analysis of Australian Taxation Office data from 2022-23 to highlight how the benefits “flow overwhelmingly to a small number of high-income, inner-city electorates in the eastern states”.
In Wentworth, where the average taxable income is $162,561, the average annual capital gains tax break is $13,450 per person, and in total accounts for 7.5% of the $20bn in total benefits.
In contrast, in Blaxland in Sydney’s west, where the typical income is $53,542, people received an average CGT concession of just $333, the report showed.
The chief executive of Acoss, Cassandra Goldie, said “it’s clear this tax break funnels billions into the wealthiest parts of our country at the expense of those doing it tough”.
The five highest earning electorates are all in Sydney or Melbourne and capture 22% of all CGT discount expenditure nationally, against just 1.6% for the bottom 10 electorates.
“This is money that could be invested in social housing, essential services, income support and the communities that need support the most. Instead, it’s being used to supercharge inequality,” Goldie said.
There is widespread speculation that the treasurer, Jim Chalmers, at the May budget will reveal a reform agenda that will curb tax breaks for investors in the name of intergenerational equity.
Economists said there were reasons to believe the CGT discount was overly generous, and there was a case for reform that taxed capital more and workers less.
Despite representing voters in some of the wealthiest suburbs in Australia, Wentworth MP Allegra Spender this week revealed a tax white paper which argued in favour of reducing the CGT discount to 30% as part of wider reform package that would allow major cuts to income taxes.
Spender at the National Press Club said she was prepared to have these “difficult conversations” with her constituents about the need for reform, and that all Australians have a “sense of fairness in our bones”.
“When you show them that the tax system artificially advantages leveraged property investment over first home buyers, they do not shrug. Australians understand what fairness means,” she said.
Ben Phillips, an associate professor at the Centre for Social Policy Research, said “it’s clear that capital gains on investments are mostly made by persons with substantial income and wealth, and it’s no surprise people with such investments cluster in well off areas such as Wentworth”.
Phillips said the 50% discount was largely in place to ensure that investors are not taxed on the inflation component of their gains.
“This seems to be a reasonable principle but since its inception in 1999 it has clearly been concessional beyond the inflation component with house price and other investment gains being more than twice the rate of inflation,” he said.
“Lowering the capital gain discount to something lower, but not zero, or returning to the old system would provide the government with several billion per year in extra revenue and be a fairer way to tax capital gains.”
The director of the Tax and Transfer Policy Institute at ANU, Bob Breunig, also argued that the CGT discount was in need of reform, but that the case went beyond just “sticking it to rich people”.
“It might sound attractive, but that’s not fair either. The better solution is to index the discount to the actual inflation rate and then the generosity goes up and down over time.”
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: theguardian.com
