A recent report by the Australian Council of Social Service (ACOSS) has highlighted that two tax concessions are significantly favouring Australia’s wealthiest individuals while exacerbating the housing affordability crisis. The report criticises the capital gains tax discount—where only half of the capital gains on property sales are taxed—and negative gearing, which permits investors to deduct property-related expenses from their income.
ACOSS’s findings reveal that the top 10 per cent of households own two-thirds of all investment properties and benefit from 82 per cent of the $16 billion in tax concessions linked to these breaks. This elite group accounts for 39 per cent of all tax deductions for rental properties, underscoring the disproportionate benefits these measures provide to the affluent.
Dr Cassandra Goldie, the CEO of ACOSS, pointed out the disparity in housing accessibility, stating, “These tax breaks disproportionately benefit the well-off in our society while millions struggle to pay the rent, let alone save for a home deposit.” Since the introduction of the capital gains tax discount in 1999, average house prices have surged by 142 per cent, significantly outpacing wage growth of just 44 per cent during the same period. The report attributes this price inflation to the tax breaks, which encourage speculative investment in existing properties rather than contributing to the actual housing supply, as 81 per cent of investment loans are for purchasing properties already in existence.
These tax advantages are said to hinder the transition from renting to home ownership and are contributing to severe housing unaffordability. Goldie summarised the situation by noting, “Australia’s absurdly generous tax breaks are supercharging the housing crisis and rising inequality in our society.”
The report suggests that amending these tax policies could lead to meaningful reductions in housing prices. For instance, reducing the capital gains tax discount from 50 per cent to 25 per cent and tightening negative gearing could potentially lower house prices by approximately four per cent—equivalent to the impact of constructing an additional 1.2 million homes over five years, a target set by the federal government under the National Housing Accord.
ACOSS is advocating for reforms that would lower the capital gains tax deduction and limit negative gearing to new investments, asserting that these changes could generate about $19 billion over four years. This revenue could be reinvested into creating 47,000 new social and affordable homes annually.
Current government initiatives include a commitment to build 1.2 million new homes by mid-2029, alongside a $9.3 billion agreement with states and territories to bolster social housing and homelessness services. Additional schemes aim to assist 40,000 households in purchasing homes and introduce tax options to promote investment in new rental developments.