Calls for capital gains tax to be applied to some family homes

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Calls have been made for the capital gains tax exemption to be removed from family homes that are sold for more than $2 million.

According to the Australian Financial Review, the Australia Institute think-tank will today release a report showing that low income households receive little benefit from the current CGT exemption system and that applying CGT to family homes worth more than $2 million would boost the federal budget by more than $12 billion over the next four years.

The Australia Institute estimates the current CGT exemption is worth $46 billion in 2015-16 and is forecast to be worth $189 billion by 2020.

Australia Institute executive director Ben Oquist told the AFR that along with applying CGT to multi-million dollar family homes, the current 50% CGT discount on the sale of homes held for longer than 12 months also needs to be looked at.

“While super tax concessions are often talked about, it's clear capital gains tax needs reform,” Orquist told the AFR.

“The discount and exemption are costing the budget tens of billions of dollars and while many other areas of tax reform would require compensation for the less well off, such as raising the GST, limiting or reducing the discount or exemption would affect only the very wealthy, be good for the economy and potentially be a multi-billion-dollar budget boost,” he said.

According to the Australia Institute, current CGT arrangements are costing the government more than defence, education or Medicare and their proposed changes would also make housing more affordable.

“Reducing the concession is likely to have a positive impact by reducing distortions in the economy," the institute said, according to the AFR.

“At present the exemption encourages over capitalisation in main residences since any increase in their value is tax free. This has the effect of pushing up the value of housing and therefore making that housing less affordable.”
 

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Comments
  • Kevin McAney says on 11/01/2016 02:49:54 PM

    I actually had to read this article twice as I didn't believe that I had understood it. House prices have increased and will continue to increase. Economic conditions, supply and demand and availability of finance are direct influencers. I fail to understand the "new" rationale that it is unfair that people buy property which increases in value and they "make money" on it. It is frustrating that this applies to "investors" but I don't see any government ever changing their ability to "profit" from the astute investment and risk by "investors" - BUT why would any fair and equitable government, organisation or individual consider it "fair" to take money from someone who has saved and worked hard to buy their OWN home and keep it in a well maintained condition or, have bought it and lo and behold the value has increased through no addition of their own over their lifetime. It is not the public's fault that "governments" are unable to manage their financial obligations. We are unable to "get a pay rise" to pay for shortfalls in our budget but the governments appear to think that it is OK and fair for them. Leave the "family home" alone.

  • Jodi says on 11/01/2016 03:43:57 PM

    It definitely needs to be looked at for those scamming the system - builders who buy houses and "live" in them while they renovate then sell again for massive profit. My grandmother's house had this done to it - the house sold 3 times in 2 years. That would have been a nice windfall for the government.

  • Lynda says on 11/01/2016 06:00:57 PM

    Government need to start looking at scammers, the wealthy and businesses, particularly 'cash only' to recoup losses due to intentional and unlawful tax avoidance. Business tax laws should be reviewed also as anyone can start a business and spend their profits on so called company depreciating assets to avoid paying tax...real smart idea that one. No wonder the Govt are looking for money. Leave the average Australian alone including the latest stupid idea of CGT on family homes. We already pay more than our fair share of tax and some people have spent a lifetime paying off their homes and you want to now get your greedy hands on their children's inheritances...I am just one of many that pays a third of my income tax to Government and that's rough when the likes of Gina Rhinehart pay none. Get your act together parliament and find another way to recoup your losses! This is one peeved Aussie!

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