Changes to how capital gains tax is applied to the sale of the family home in Australia would have a detrimental effect on average families and the nation’s property market according to one property lobby group.
Yesterday, think tank the Australia Institute released a report that called for family homes worth more than $2 million to be no longer exempt from CGT and a re-think of the current 50% CGT discount on the sale of homes held for longer than 12 months
The Australia Institute claimed the changes will leave the federal budget up to $12 billion better off over four years and also help improve housing affordability, but the Property Council of Australia (PCA) claims the proposal would bring about negative consequences.
“Existing homeowners would be penalised for moving under this proposal, which would force them to stay in homes. This unnecessarily impacts older Australians who are looking at downsizing,” PCA executive director residential Nick Proud said.
“Owner occupier homes make up two thirds of the 9 million homes in Australia today and the family home is generally the savings base for retirement. This proposal would unfairly impact on people’s futures,” Proud said.
By making family homes sold for more than $2 million subject to CGT, Proud said the nation’s renovation industry would suffer.
“Removing CGT exemptions on the principal place of residence would penalise average families who will receive a significant CGT bill for any improvement in home values if they were to sell,” he said.
“Renovations that improve the capital value on the family home, which are vital for the modernisation and more sustainable effective use of housing, would be less likely under this proposal.”
Housing supply and affordability would also be impacted, as people would be more likely to invest in assets that have a more favourable tax profile.
“Removing the CGT exemption on the family home would also see capital transfer into other tax favourable investments, such as shares, reducing housing availability, supply and affordability,” Proud said.
“The record pipeline of new homes for home buyers is finally translating to pockets of greater affordability, however removing CGT would impede new home delivery and turnover, having unintended consequences if introduced.”
The proposal has drawn a mixed response from the Federal Labor party, with a spokesman for Shadow Treasurer Chris Bowen saying the party would not apply CGT to the sale of family homes, but the Opposition is considering changes to the 50% discount arrangement, according to a report in Fairfax media outlets.
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