Institute urges end to tax break on homes
ENDING one of Australia's most controversial tax breaks, the exemption from capital gains tax on the primary home, could boost Canberra's coffers by $46 billion.
A new report from The Australia Institute has urged the Federal Government to end the tax break, which it argues mainly benefits the nation's wealthiest 20% of households.
While the institute argues for an end to the tax break, it also commissioned modelling showing removing the tax break for homes worth $2 million or more could reap $11.8 billion.
That move would affect just 1% of the nation's homes, drawing in the revenue over a four-year period.
The report also found the top 20% of households by income reaped more than half the financial benefits of the CGT exemption.
Under the modelling, 56% of government revenue gained by cutting the exemption to homes worth more than $2 million would come from the top 10% of households by income.
Institute executive director Ben Oquist said the tax break was "costing a fortune" and the institute had "done the work to put the numbers behind the idea" raised in an economic forum last year.
"Along with superannuation, capital gains should be a target for any serious tax reform in 2016," Mr Oquist said.
"Limiting CGT exemption to houses under $2 million would be good for the budget, the economy, and equity in Australia."
While the government has not ruled out changes to the CGT tax break, it is part way through a tax white paper process which Treasurer Scott Morrison has said would consider any ideas raised. But he also promised any tax policy changes must be based on returning new revenue to voters, most likely through income tax cuts.
While the government has effectively ruled out changes to the GST - because state governments cannot agree on them - Labor has capitalised on the wider tax debate, ensuring the issue will remain a live one in the coming federal election campaign.
Mr Morrison late last year promised income tax cuts across the board, in a trade-off with states for a higher GST but the move failed when the states reached an impasse on the GST.