No tax concession does less to stimulate innovation or employment than the capital gains tax exemption on luxury homes. Indeed, by encouraging the most wealthy Australians to park billions of dollars in spare bedrooms that gather dust and detritus from Christmases past, the exemption simply diverts capital away from productive uses.
The single largest tax concession in the revenue strapped Australian Federal Budget is the Capital Gains Tax (CGT) exemption on the primary residence. The exemption forgoes $46 billion annually – a greater sum than the government spends on the Age Pension, Defence or Medicare.
A new report by The Australia Institute, with modelling commissioned from NATSEM, also reveals that the top 20% of income by household reap more than half of the benefit of the CGT exemption (see figure 1 below).
The largest tax concession in Australia is the capital gains tax (CGT) exemption for themain residence. Last year it cost the budget $46 billion and is predicted to cost the budget $189 billion over the next four years. Each year the cost of the CGT exemption on for the main residence costs the federal budget more than Defence, Education or Medicare.
With the government looking for budget savings that do not disproportionately impact low income households, it is appropriate to look at this very large tax concession.
First published by The Australian Financial Review - here.
The mining boom tax cuts have left the Australian budget unable to collect the revenue needed to fund the services that Australians expect from their government.
The Treasurer's insistence that there is no revenue problem, combined with the received political wisdom that the family home is off-limits in the tax debate, makes finding solutions difficult.
In the lead-up to the 2013 election both the Coalition and the ALP pledged to make no changes to the superannuation system in the coming term of government. Stability, we were told, was what the system needed. Less than three years later both major parties are promising to change the superannuation system. Reform, we are told, is what the system needs.