Australia's capital gains tax discount will cost taxpayers $250 billion over the next decade, with retirees and high-income earners capturing most of the benefit while younger Australians face an increasingly unaffordable housing market.
The analysis, reported by The Guardian, comes as housing affordability has become the defining economic issue for a generation of Australians priced out of ownership.
Under current law, Australians pay tax on only 50% of capital gains from assets held longer than 12 months. The discount overwhelmingly benefits property investors and high-income earners who can afford to hold appreciating assets.
Meanwhile, first-home buyers face median house prices exceeding $1 million in Sydney and Melbourne, with wages failing to keep pace. The disconnect between property wealth and earned income has created what economists call intergenerational inequity - older Australians accumulating wealth through property while younger ones face permanent renting.
But don't expect reform anytime soon. Both major parties have refused to touch property tax concessions ahead of elections, despite mounting evidence that the current system entrenches inequality.
Mate, when both sides of politics look at a quarter-trillion-dollar handout that makes housing less affordable and decide that's fine, you know the people benefiting have more political clout than the people suffering.
The capital gains discount works in tandem with negative gearing - which allows property investors to deduct rental losses from their taxable income - to create powerful incentives for speculation in housing markets. Critics argue the combined effect inflates property prices while providing minimal economic benefit.
Defenders of the system claim the discount encourages investment and entrepreneurship. But data shows the vast majority of capital gains claims come from property rather than business investment.
A satirical piece in the Betoota Advocate captured the political reality: Australia's media, political, and business class will unite to crush any reform attempts.
It's darkly funny because it's true. The last time a major party proposed reforming negative gearing and capital gains tax concessions - Labor in 2019 - they were crushed at the polls after a massive scare campaign.
The political lesson was clear: don't touch property tax concessions, even when they cost a fortune and worsen housing affordability. So $250 billion over ten years it is.
