Extending the length of time an individual must hold an asset before it is eligible for a capital gains tax break has recently been suggested as a way of rectifying Australia’s sky-high property prices.
A recent report has found that the 50 per cent CGT discount on profits made from property and share sales has contributed to the country’s property bubble, along with low-interest rates and a lack of housing supply.
Currently, any capital gain made on an asset that is sold within 12 months is ineligible for the CGT discount. Doubling this holding period requirement from 12 to 24 months and reducing the size of the discount to 33.3 per cent are two of the reform suggestions that have been put forward.
It is estimated that reducing the 50 per cent tax discount to 33.3 per cent would raise more than $2 billion in one year.
The CGT discount was originally intended to encourage savings and account for inflation. Since the end of the 1990s when it was introduced, investor activity in the Australian housing markets has flourished, growing steadily from $1 billion in 1995 to nearly $15 billion in 2015.