Tax reform signals market shift as ATO data contradicts opposition claims on capital gains
Proposed capital gains tax changes appear to be influencing housing prices, while official taxation statistics refute assertions that younger Australians are the primary beneficiaries of the current discount.
Greg Jericho, chief economist at the Australia Institute, has presented evidence to a Senate committee indicating that proposed changes to the capital gains tax (CGT) discount are already influencing housing market dynamics and wealth distribution, despite the legislation not yet being enacted. Jericho argued that the 50 per cent CGT discount is a central factor in the housing affordability crisis, a stance challenged by opposition finance spokesperson Claire Chandler during the hearing.
Chandler and economist Richard Holden countered Jericho’s assertions by attributing property price increases to broader structural factors, including the deregulation of the banking system under former prime minister Paul Keating, Reserve Bank of Australia inflation targeting, and international banking accords. Jericho maintained that the impact of the 1999 introduction of the discount remains relevant, noting that dwelling prices relative to household income remained stable until that policy shift.
Recent auction data supports the argument that market participants are reacting to the proposed reforms. Weekend auction results indicate a national price drop of 10 per cent, with Sydney and Melbourne experiencing declines of 7 to 8 per cent over the year to November. Jericho cited these figures as evidence that the anticipated tax changes are having an immediate effect on property values, contradicting claims that the discount has no bearing on current market conditions.
The debate also centres on the demographic distribution of capital gains, with opposition parties such as Pauline Hanson’s One Nation arguing that the changes disproportionately harm young people. Hanson claimed at the National Press Club last week that the largest capital gains cohort is under 35. However, Australian Taxation Office (ATO) data for 2023–24 reveals that while 369,000 people under 35 had capital gains, nearly 400,000 people over 65 did, making the older cohort the largest group.
Further ATO statistics highlight significant disparities in income sources across age and wealth brackets. Capital gains account for less than 1 per cent of total income for those under 35, compared with 10 per cent for those born before the 1960s. The data also shows that 27,964 individuals earning above $1 million, representing 0.2 per cent of income earners, captured 38 per cent of net capital gains in 2023–24, underscoring the concentration of wealth among high-income older Australians.
Jericho concluded that the arguments from vested interests against the tax reforms are hollow, suggesting that concerns regarding young people mask a desire to protect older, wealthier demographics. He argued that for three decades, policy has favoured this cohort, and the current government’s attempt to address intergenerational wealth inequality is prompting resistance from those benefiting from the existing system.