Capital gains tax and negative gearing reforms are overdue

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It’s an all too familiar Sydney story: a young couple have their hearts set on buying their first home but are outbid by a property investor backed by overly generous tax benefits.

The capital gains tax (CGT) discount – which exempts individuals and small unincorporated businesses from paying tax on 50 per cent of capital gains on an investment held for more than a year – was designed to boost incentives to save and invest.

But two decades of evidence shows that the generous discount, when used along with negative gearing, has overcompensated property investors.

The e61 Institute think tank said in a recent submission to parliament that the CGT discount is “inequitable and inefficient” and distorts the way Australians “work, save, invest and finance their investments”.

The Grattan Institute, another independent think tank, told the........

© The Age