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Australia’s 50% CGT discount: Policy oversight?
Published on 01 Mar 20 by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE
Since its enactment in 1999–2000, the 50% capital gains tax (CGT) discount has become an entrenched feature of the Australian tax system. The CGT discount is effectively a tax rate preference that, we argue, remains in place despite its tax policy shortcomings. These include that the CGT discount is inequitable from the perspective of horizontal and vertical equity, and it is inefficient in that it may encourage an overinvestment in assets that produce most of their return in the form of capital gains. This article is a critique of the CGT discount which draws on a chronologically organised analysis of the views and commentary on the CGT discount from individuals and organisations outside of government. Views and commentary on the CGT discount are sourced from the news media, submissions to government discussion papers, and other publicly available information. This article critically evaluates the policy basis and evidence for the 50% CGT discount and is, in part, concerned with whether there is an overall justification for the preference. It is argued that the justifications made by policymakers in favour of the CGT discount, at the time of its enactment, lacked sound tax policy foundations. It follows that the case for the CGT discount continuing in its current form is diminished.
Author profiles
John Minas
John is a Senior Lecturer, Curtin Law School, Curtin University and an Adjunct Research Fellow, Griffith Law Futures Centre. - Current at 13 January 2022
Dr Brett Freudenberg CTA
Brett is a Professor – Taxation at Griffith University. Brett is known for his research expertise in the tax law and policy issues facing private enterprises, as evidenced by his Fulbright Scholarship (2006) and over 80 refereed publications in leading Australian and international journals. In 2020, he was awarded the national ATTA-Hill medal in recognition of outstanding contribution to Australasian tax policy and tax teaching. Brett is passionate about education being a transformative process, and his effectiveness as a teacher has been recognised through five national awards (including the award of two Australian Learning and Teaching Council citations: 2008 & 2011). In 2019 Brett was successful in securing funding from the Federal Government to establish the Griffith Tax Clinic, which sees students under supervision providing free tax assistance to those in need in the community. Prior to commencing with Griffith University, Brett was a senior taxation consultant with KPMG and a solicitor with Corrs Chambers. - Current at 06 July 2022
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