Existing property investors likely to avoid more tax under possible CGT changes in Chalmers’ May budget
Summary
The Australian government, led by Treasurer Jim Chalmers, is expected to change capital gains tax (CGT) rules in the upcoming budget but plans to protect current property investors from extra taxes. Any new rules would mainly apply to future investments and are unlikely to bring in large amounts of new revenue.Key Facts
- Treasurer Jim Chalmers wants to respect past investment decisions when changing capital gains tax rules.
- The current 50% discount on capital gains for assets held more than one year may be modified, possibly by adjusting for inflation like before 1999.
- Changes to tax rules, including negative gearing, would mainly target new property investments, not existing ones.
- Experts say cutting the CGT discount by half over five years could raise about $6.5 billion annually.
- Applying CGT changes only to new investments would generate much less revenue, according to the Parliamentary Budget Office.
- The government aims to shift home ownership from investors to people who live in their homes rather than reduce home prices.
- Economic studies predict tax changes could lower home prices by 1-4% and increase home ownership rates by 3%.
- Increasing housing supply is considered the main way to make homes more affordable.
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