ACOSS data reveals CGT discount billions flow to Australia’s wealthiest electorates

Research from the Australia Council of Social Services (ACOSS) released today shows that the benefits of the capital gains tax (CGT) 50% discount overwhelmingly favours the wealthiest electorates in the county.

The research revealed that a third of the total $23.5bn in benefit of the CGT discount goes to just 10 of the highest income electorates in Australia. The top 5 electorates ranked by average taxpayer benefit – all in Sydney and Melbourne – receive 22% of all CGT discount expenditure nationally, while the bottom 10 electorates receive just 1.6%.

Perhaps most stunningly, just over half of all the benefits of the CGT discount goes to the wealthiest 25 electorates.

ACOSS’s research, which broke down the benefits of the CGT discount by electorate for the 2022-23 financial year, found that the discount benefit flows overwhelmingly to capital cities and mostly to eastern states.

It found that the average capital gains tax break for someone in Sydney is $2,402 per year, and $1,647 in Melbourne, while in Darwin people receive an average CGT concession of just $522 per year. NSW receives more than four times the average CGT discount per taxpayer than the Northern Territory, and more than twice that of Tasmania and South Australia.

The seat of Wentworth receives the greatest benefit from the CGT discount with nearly $1.8bn, followed by the seat of Kooyong in Melbourne with $1bn:

Importantly this does not mean reform of the CGT discount in these electorates is unpopular. When the ALP took a policy of a 25% CGT discount to the 2019 election both Wentworth and Kooyong saw swings against the Liberal Party.

The current member for Wentworth, Independent Allegra Spender, in her Tax White Paper this week, called for a reform of the CGT discount with a minimum of 19.25% tax of all capital gains, and a 30% discount applying to those with earnings above $135,000.

ACOSS CEO, Dr Cassandra Goldie, notes that, “It’s clear this tax break funnels billions into the wealthiest parts of our country at the expense of those doing it tough.”

“This is money,” she argues “that could be invested in social housing, essential services, income support and the communities that need support the most. Instead, it’s being used to supercharge inequality. That is not a fair or sensible use of public funds.”

ACOSS is calling on the Federal Government to halve the 50% CGT discount progressively over 5 years, end negative gearing immediately for new investments, and phase it out over 5 years for existing investments and invest the savings in essential supports and services, including social housing and income support.

The research supports work done by the Australia Institute, which in its submission to the Senate inquiry into the operation of the CGT noted the “discount has introduced a distortion to the tax system that favours the wealthy and increases inequality. It acts as an incentive for housing investors that allows them to outbid prospective owner-occupiers and placed home ownership outside the reach of many”.

ACOSS’s research adds to the growing weight of evidence pointing top the inequality inherent in the CGT discount and the need for urgent reform in the May budget.