There are calls on the newly formed Coalition Government to cut capital gains tax (CGT) breaks on property sales to help fix the budget deficit.
Popular Senator Nick Xenophon, the Property Council of Australia and the Grattan Institute all agree that CGT needs reform.
Currently, the CGT concession halves the value of any profit made from the sale of an asset held for over 12 months when added to the individual’s taxable income.
The cut could go along similar lines to what Labor proposed in their campaign on negative gearing reform, suggesting CGT concessions should be cut from 50 per cent to 25 per cent.
Wielding increasing power after a good election result, Mr Xenophon said the CGT concession cut would be an acceptable option.
“I think so far the debate has been focused on the negative gearing, whereas I think the debate will now go to the CGT concession,” he told Australian Financial Review.
“I think that’s where we’re going. It’s likely to be less contentious and seen as less of a broken promise.”
Negative gearing received most of the spotlight in the election campaign but it’s CGT concessions that actually account for more lost money in the budget.
The CGT subsidy cost the federal budget around $4 billion in 2014.
The Property Council’s head of policy and housing Glenn Byres told Australian Financial Review they would accept change to CGT.
“We have accepted that the 50 per cent discount in a low inflationary environment is significant,” he said.
“We have also argued that there is also scope to increase the qualifying period to two years.”
Mr Byres said they would like to see the concession cut to 40 percent instead of halved to 25 per cent as proposed by Labor.
“This industry understands that budget repair is necessary,” he said.
“Our concern with the Opposition’s changes to negative gearing and CGT was that it put at risk jobs as well as needed housing supply.”
Most economists agree Australia needs serious budget deficit improvement after ratings agency Standard & Poor formally put the Australian economy on notice for a downgrade to its AAA credit rating.