(Cth) Reduce the Capital Gains Tax Discount for Individuals and Trusts

Akash Merai, Mieke Crighton, Ishika Das & Mecca Setiawan
1 day ago
8 min read

Author: Akash Merai, Mieke Crighton, Ishika Das & Mecca Setiawan | Publish date: 23/4/2026

P: In Australia, individuals and trusts currently receive a 50% discount on capital gains for assets held for more than 12 months.
S: The Treasurer should amend Section 115.100 of the Income Tax Assessment Act 1997 (Cth) to substitute '50%' with '25%'.
E: The Grattan Institute: ‘the 50 per cent CGT discount for individuals and trusts should be reduced to 25 per cent’.

Problem Identification:

Section 115.10 of the Income Tax Assessment Act 1997 (Cth) provides that ‘an individual [and] ... a trust’ are eligible for the 50% Capital Gains Tax (CGT) discount on assets held for more than 12 months.

According to the ATO, this means that those eligible may only pay tax on half of their realised Capital Gains. Emeritus Professor Chris Evans from UNSW Business School stated that the ‘50% CGT discount ... has produced significant inequities, inefficiencies, revenue losses and compliance burdens, while failing to meet the principles of a well-designed tax system.’

Context:

The ATO described CGT as the tax paid ‘on profits from disposing of assets including investments, such as property, shares and crypto assets.’

Negative gearing refers to ‘when the cost of owning a rental property outweighs the income it generates each year. This creates a taxable loss, which can normally be offset against other income including … wage or salary, to provide tax savings.’

PerCapita noted that in 1999, a ‘previous inflation adjustment was replaced with a flat 50 per cent discount, with the goal of stimulating investment in the share market.’

Arguments:

The Grattan Institute argued that this ‘distorts investment decisions, mak[ing] housing markets more volatile’. Grounded Community Land Trust Advocacy stated that ‘the CGT discount … operates as the exit reward’ to negative gearing, incentivising reselling for a profit ‘over productive or shelter-oriented investment.’ Oxfam Australia highlighted that ‘the introduction of the 50% capital gains tax discount in 1999 led to a 13%-per-year surge in house prices (above inflation) from 2001 to 2003 and a 6%-per-year increase from 2013 to 2017.’ Finance expert Alan Kohler further argued that the capital gains tax concessions increase housing demand, and stated that they ‘“increased what investors were prepared to pay for property.”’

The Grattan Institute argued that the money lost due to the CGT discount could have been ‘money which could be used to shore up the budget.’ Evans highlighted that the ‘revenue cost of the discount is significant and growing’. Think Forward, a non-profit organisation for the advocacy of intergenerational justice, further stated that the CGT discount ‘starves the Budget of funds for vital investments in public goods and services.’ The Australian Council of Social Services CEO, Dr Cassandra Goldie, stated that “‘these tax breaks for investment properties also come at a cost of at least $11 billion each year, which could be invested in social and affordable housing for people with low and modest incomes.”’ Evans observed that ‘the CGT discount is among the largest tax expenditures on the Commonwealth budget’ and suggested that ‘the fiscal impact of the discount is not commensurate with any proven economic benefit.’

Oxfam Australia highlighted the capital gains tax discount ‘primarily benefits Australia’s wealthiest and deepens inequality, providing little benefit to everyday Australians.’ The Australian Council of Trade Unions stated, ‘the current 50% rate of CGT is favoring professional landlords with large numbers of investment properties, while pricing out many workers, including younger workers from home ownership.’ Professors Brett Freudenberg and John Minas at Griffith University stated that ‘nearly three-quarters of the benefit of the CGT discount accrues to the top 10 per cent of taxpayers by household income.’ Evans further stated that ‘intergenerational equity concerns arise’ with the 50% CGT discount as it ‘delivers the greatest benefit to wealthy property owners in high-value urban markets.’

Advice/Solution Identification:

The Grattan Institute, the Australian Council of Trade Unions, the National Foundation for Australian Women, and PerCapita, among others, have all called for the reduction of the CGT discount from 50% to 25%. The Grattan Institute indicated this will create ‘economic and budgetary benefits’ and will ‘reduce more economically harmful taxes and lower the tax burden on younger Australians’. PerCapita further stated that this could ‘improve Australia’s wealth distribution’ and help stabilise the housing market.

Precedent:

There is domestic precedent for limiting preferential tax treatment of capital gains. The Income Tax Assessment Act 1997 (Cth) was amended in 2012 to remove the CGT discount for individuals who are foreign residents or temporary residents.

Public support:

The following organisations have called for the reduction of the CGT discount from 50% to 25%:

Broad support:

The following organisations and experts have called for a similar reduction or abolition of the 50% CGT discount:

Grounded Community Land Trust Advocacy - Recommended reducing it to 10% over seven years.

Abolishing the CGT Discount:

The Australia Institute - Recommended abolishing the CGT discount.
Professor Chris Evans UNSW - Recommended abolishing the CGT discount.
Oxfam Australia - Recommended abolishing the CGT discount for individuals and trusts.

Phasing out the CGT discount on investment properties:

Australian Manufacturing Workers Union (AMWU) - Recommended the removal of the CGT discount on investment properties, grandfathered in over a 2-year period.
Australian Nursing and Midwifery Federation - Recommended phasing out the CGT discount on investment properties.
Council to Homeless Persons - Recommended phasing out the CGT discount on investment properties.
Better Renting - Recommended phasing out the CGT discount on investment properties.
Prosper Australia - Recommended removing or scaling back the CGT discount on land and land-like assets.

This list reflects publicly stated positions and should not necessarily be taken as endorsement of this specific brief.

News Coverage:

The Guardian - “NSW Government calls for rethink on capital gains tax discount to ease housing affordability”. This article examined the federal inquiry into the 50% CGT discount. By: Tom McIlroy | Wed 14 Jan 2026 - Read the article here.
ABC News - “MP whose electorate gets largest capital gains tax discount wants to rein it in”. This article discussed proposals by MP Allegra Spender to lower the CGT. By: Tom Crowley | Fri 13 March 2026. Read the article here.
The Guardian - “Capital gains tax discount ‘overwhelmingly’ benefits investors in Australia’s richest electorates, analysis shows”. This article examined evidence that the CGT discount primarily benefits higher-income earners and investors in Australia. By: Patrick Commins | Fri 13 March 2026 - View the full article here.
Women’s Agenda - “Capital Gains Tax is a feminist issue. Right now women are getting a poor deal”. This article discussed the CGT discount from a feminist perspective. By Maiy Azize and Renee Carr | Thurs 12 March 2026 - Read the article here.
The Guardian - “Labor appears set to reform capital gains tax discount after parliamentary inquiry findings”. This article discussed party positions on the CGT discount and the evidence put forth in the parliamentary inquiry. By Tom McIlroy | Tue 17 March 2026 - Read the article here.

Where to go to learn more:

(2025) Submission to the Senate Select Committee | Grattan Institute - This report recommended reforming the Capital Gains Tax discount to 25 per cent, with a gradual phase-in over 5 years. View the full submission here.
(2025) Submission to the Inquiry into Local Government Funding and Fiscal Sustainability | Prosper Australia - This report outlined the issues surrounding the CGT discount and recommended that it either be abolished or scaled back. View the full submission here
(2025) Submission to the Select Committee on the Operation of the Capital Gains Tax Discount | Working with Women Alliance - This submission discussed the problems associated with the CGT discount from a feminist angle and called for the government to address its distributional inequities. Read the full submission here.
(2026) Why We Should Not Increase Capital Gains Tax | The Centre for Independent Studies - This report analysed the previous publications of the Capital Gains Tax by CIS and proposed why the CGT must balance revenue, equity and efficiency considerations. View the full report here.
(2026) What is capital gains tax and how does it work? | The Guardian - This video explained how capital gains tax operates in Australia, how it is applied to assets and its role in the broader tax system and housing market debates. Watch the video here.
Income Tax Assessment Act 1997 (Cth) - Read the Act here.

Human Perspective:

Trigger Warning: Housing insecurity and financial stress

Amelia is a 29-year-old registered nurse working rotating shifts at a busy public hospital. After her landlord sold the apartment she had been renting for 3 years, she was forced to move further away from the hospital to find something she could afford. Her new place added nearly an hour to her commute, which made her feel exhausted after overnight shifts that already left her drained. Amelia noticed that many of the homes in her old neighbourhood were bought and sold by investors, and the rent in the area kept rising beyond what she could realistically afford on her salary. She often heard people talk about investors buying and selling properties for profit, something that felt far removed from her daily reality of paying rent and covering bills. This housing uncertainty made it harder to plan her life or to feel settled in the community where she works, even though she spends most of her time caring for people who live there. Because of her struggles with renting, she decided to take a loan out to buy a modest house or apartment closer to her work. However, she was constantly getting outbid for any suitable place she could find. In one instance, she overheard a buyer's agent on behalf of a professional landlord at an auction talking about his boss’s plans to sell in a couple of years for a major profit. Amelia felt helpless and was unsure if she would ever be able to own her own property.

To protect the anonymity of those involved, this is a fictionalised account drawn from an amalgamation of real-life stories, experiences and testimonials gathered during the research process for this brief. Any resemblance to actual individuals is purely coincidental.

Conflict of interest/acknowledgment statement:

N/A

Support

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Disclaimers

Please review all FORE disclaimers here.

Reference list:

Australian Council of Social Service (2025, March 11). Housing tax breaks fuel housing crisis and must be fixed. https://www.acoss.org.au/media_release/housing-tax-breaks-fuel-housing-crisis-and-must-be-fixed/

Australian Council of Trade Unions. (2026, February 3). Scale back on capital gains discount. [Media release]. https://www.actu.org.au/media-release/scale-back-capital-gains-tax/

Australian Taxation Office (2025, January 17). CGT discount. Australian Government. https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/cgt-discount

Australian Taxation Office (2024, January 31). Trusts, trustees and beneficiaries. Australian Government. https://www.ato.gov.au/businesses-and-organisations/trusts/trusts-trustees-and-beneficiaries

Australian Taxation Office (2025, June 23). What is Capital Gains Tax? Australian Government. https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/what-is-capital-gains-tax

Australian Taxation Office (2022, May 26). How to work out your capital gain or capital loss. Australian Government. https://www.ato.gov.au/forms-and-instructions/capital-gains-tax-guide-2022/part-a-about-capital-gains-tax/how-to-work-out-your-capital-gain-or-capital-loss

Charles, B. (2026, February 24). Capital gains tax concessions slammed as unfair and cruel to younger generations [Transcript]. SBS News. https://www.sbs.com.au/news/podcast-episode/capital-gains-tax-concessions-slammed-as-unfair-and-cruel-to-younger-generations/e8f2opgor

Chen, J. (2025, October 2). Capital Gains: Definition, Rules, Taxes, and Asset Types. Investopedia. https://www.investopedia.com/terms/c/capitalgain.asp

Coates, B., Moloney, J., & Sathanapally, A. (2025, December). Reforming the Capital Gains Tax discount. Grattan Institute. https://grattan.edu.au/wp-content/uploads/2025/12/Grattan-Institute-2025-Senate-Select-Committee-Capital-Gains-Tax-Inquiry.pdf

Daley, J., & Wood, D. (2016, April 25). Hot property: negative gearing and capital gains tax. The Grattan Institute. https://grattan.edu.au/report/hot-property/

Evans, C. (2025, November 30). Submission to the Senate Select Committee on the Operation of the Capital Gains Tax Discount. https://www.aph.gov.au/DocumentStore.ashx?id=84885633-a66c-41fb-a221-9db27434cd20&subId=780944

Fitzgerald, K. (2025, December). Submission to the Select Committee on the Operation of the Capital Gains Tax Discount. Grounded Community Land Trust Advocacy. https://www.aph.gov.au/DocumentStore.ashx?id=937d2596-25db-4b42-b3c6-0ecdbf826fdd&subId=781381

Freudenberg, B., Minas, J. (2019). Reforming Australia’s 50 per cent capital gains tax discount incrementally. eJournal of Tax Research, 16(2), 317-339. https://www.unsw.edu.au/content/dam/pdfs/business/acct-audit-tax/research-reports/past-issues/bus-2019/2019-volume-16-number-2/BUS-2019-V16-paper4-v16-n2.pdf

Income Tax Assessment 1977 (Cth). https://www8.austlii.edu.au/cgi-bin/viewdb/au/legis/cth/consol_act/itaa1997240/

Law Society. (n.d.). How a trust works. https://www.lawsociety.com.au/for-the-public/know-your-rights/trust/how-trust-works

Mortgage Choice. (n.d.). What is Negative Gearing? https://www.mortgagechoice.com.au/guides/property-investment/tax-and-gearing/negative-gearing-and-positive-gearing/

Oxfam Australia (2025, December 18). Submission to the Select Committee on the Operation of the Capital Gains Tax Discount. https://www.aph.gov.au/DocumentStore.ashx?id=7e69f1e9-634d-4a01-9223-b4fcf49f2d66&subId=781358

Reserve Bank of Australia. (n.d.). Inflation. https://www.rba.gov.au/inflation-overview.html

Richardson, D. (2023, May 11). The budget in six charts. The Australia Institute. https://australiainstitute.org.au/post/the-budget-in-six-charts

Walker, T. (2025, December). Senate Select Committee on the Operation of the Capital Gains Tax Discount. Think Forward. https://www.aph.gov.au/DocumentStore.ashx?id=22ba6e43-fec3-4546-9a41-3aa8f9de68a7&subId=781421