Home News Economists think capital gains tax should be abolished

Economists think capital gains tax should be abolished

Font size :



A new poll conducted by the Economic Society of Australia (ESA) found that a significant number of economists agreed with a statement that the capital gains tax (CGT) deduction should be removed entirely. 

With the federal budget approaching, the government is grappling with ways to enhance housing affordability, including reforming the current 50% CGT deduction on property investment. 

The ESA Monash Forum polled economists on the following proposition:

Capital gains tax deductions for housing investment should be removed because they overstimulate the housing market, contributing to rising house prices.

This proposition is deliberately more extreme than the proposal reportedly being considered by the federal government, which is to slash the current discount to 25%. Other propositions reportedly being considered in Canberra include decreasing the CGT discount to 40% for property investors, or some other reduction in the CGT discount for property investors.

The poll found that 44.4% of economists agreed with the ESA’s proposal that the CGT deduction should be removed entirely (22.2% agreeing and 22.2% strongly agreeing). However, 40.7% disagreed with the statement (22.2% disagreeing and 18.5% strongly disagreeing). A further 14.8% of respondents were uncertain.

According to Maria Yanotti, lecturer of economics and finance at the Tasmanian School of Business & Economics, while some economists support the current role of the CGT discount, others believe the tax should also apply to the gains that result from inflation. Many economists further argue that the principle of the CGT discount is not bad policy; however, the level of the discount is too generous and is open for abuse.

The economists pointed out that changes in one type of tax will distort the economy, especially if reforms are targeted to only one type of asset (in this case, property). Instead, some economists suggest the correct approach should be “holistic reform” to fix tax inefficiencies. Tax treatment should also be equal between all forms of investment and saving.

The majority agree that housing affordability policies should be focused primarily on housing supply and housing market constraints (including transport and infrastructure) to solve the crisis. Other policies, such as shared-ownership schemes and government-backed bonds, are also being considered. 
 

Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker

Mortgage News and Articles

Young Sydneysiders are less keen on homeownership Young Sydneysiders are less keen on homeownership

Many would rather rentvest than be tied down to a costly owner-occupier mortgage, according to new studies Read more

New social housing aims to transform Ivanhoe Estate New social housing aims to transform Ivanhoe Estate The sprawling redevelopment aims to boost the supply of affordable housing in Sydney ... Read more

A new suburb will be built in west Melbourne A new suburb will be built in west Melbourne Mount Atkinson will become home to more than 22,000 people over the next 15 years ... Read more

Surging house prices threaten liveability in Melbourne Surging house prices threaten liveability in Melbourne Analysts warn the city could become just as unaffordable as Sydney, if property trends continue ... Read more

More mortgage news and articles

Sponsored Links

Monday, Aug 21, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords