Capital gains tax discount more to blame for property bubble than negative gearing

Capital gains tax discount more to blame for property bubble than negative gearing
Capital gains tax discount more to blame for property bubble than negative gearing

A new Deloitte report says that while negative gearing gets the blame, it is the 50% capital gains tax discount that has been mostly under-appreciated for frenetic property speculation.

Doubling the length of time an asset has to be held before it is eligible for a capital gains tax break - from 12 months to 24 months - was an option that needed consideration, the report suggested. 

Another options suggested for reform included reducing the size of the discount to 33.3 %. 

"The current . . . discount is too generous, to the extent that it undermines the very principles of this nation's progressive income tax system," the Deloitte report says.

It suggests 33.3% as this is what super funds are eligible to receive. 

Currently capital gains on an asset sold within 12 months are not eligible for any CGT discount.

It is the second "myth-busting" report released by Deloitte as part of its contribution to the tax reform debate.

While overused, negative gearing was not the "evil" force many believe it to be, the report advised. Shares and other assets can also be negatively geared.

Another "skeleton in the closet" for the Australian taxation system are the carried-forward capital losses, the report suggested.

The ATO calculates carried forward losses as at 2012-13 at $8 billion for individuals, $35 billion for companies and $33 billion for super funds.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

Tags: 
Negative gearing Property market

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