The family home has eclipsed superannuation as the nation’s biggest tax break, with new figures from the Commonwealth Treasury indicating that capital gains tax exemption on family homes cost the national budget a record $61.5bn in 2016-2017. This was well in excess of the $33bn lost to superannuation tax concessions.

The $61.5bn consists of the $27.5bn the government believes it would have gotten if it had taxed profits made on the sale of family homes at the present capital gains tax rate, plus an additional $34bn it would have gotten if the capital gains tax rate were the same as the marginal tax rate instead of being discounted by 50%.

The Treasury’s annual Tax Expenditures Statement was released without any major announcement yesterday and identifies 25 tax breaks. Each tax break costs more than $1bn, with the overall cost of the tax breaks being close to $150bn.
If the tax breaks were abolished, it would close the budget deficit four times over.

The Tax Expenditures Statement was mandated to ensure that tax expenditures received the same scrutiny as cash expenditures. The tax breaks on the family home cost the budget as much as the Pharmaceutical Benefits Scheme and the age pension combined. Moreover, even after the recently legislated cuts, the superannuation tax breaks cost the budget as much as foreign aid and defence combined.

Other major sources of tax breaks include the concessional taxation of superannuation earnings (totalling $16.9bn), the concessional taxation of superannuation contributions (totalling $16.9bn), and the capital gains tax discount for individuals and trusts (totalling $9.6bn).