Will Changes To CGT Spook The Property Market?

First introduced in the 1980s, capital gains tax (CGT) is back in the headlines in early 2026 because potential changes to CGT rules are being discussed ahead of the federal budget, alongside a Senate inquiry that’s examining how the tax is applied. On 4 November 2025, the Senate resolved that the Select Committee on the Operation of the Capital Gains Tax Discount be established. The committee is to present a final report by 17 March 2026. This past week they ran hearings, and took evidence from a range of parties. Given the pressure on housing at the moment, the arguments are getting pretty heated, with people on one side of the argument claiming it’s the main reason why housing is widely unaffordable for ordinary first time buyers, and that an inflection point can be traced to when the more generous 50% rate was introduced, because property investors have a natural advantage, especially when coupled with the negative gearing provisions, which allows investors also to offset costs relating to investment property again other income. And the bulk of the benefits accrue to the most affluent. The ATO data certainly confirms the benefit distribution. Economists told the Senate committee that the current CGT discount overcompensated for inflation and paring it back could have economic benefits. Those who oppose any change (from the Liberal Parties view that increasing tax will generally reduce supply of housing, a simplistic rule of thumb, but a good sound bite), to those who argue that the principle of taxing nominal capital gains at lower rates than ordinary income is unexceptional and was recognised in Australia’s first model of CGT in 1985. The 50% discount in 1999 replaced what was essentially a different form of discount in the 1985 model based on indexing the cost base of assets to CPI inflation combined with an averaging scheme that limited the effect of lumpy capital gains pushing taxpayers into higher tax brackets. the 50% discount over-compensates for inflation, in some cases it does and in some it compensates or even under-compensates, but the key point is that it was never intended solely to compensate for inflation. It was meant to be a general incentive for saving and investment, which is needed now more than ever in view of stagnant productivity. We must do proper tax reform in Australia. Nickle and diming around CGT and Negative gearing won’t really move the dial. Our tax system is badly broken, not least because of the frozen bands, and the greater reliance on individuals compared with businesses. And the system is so complex that some claim the Average Australian ends up paying about $8,000 a year on tax management. Its time for real reform. The talk will impact decisions now out there in property land. Add this current debate to the expectation of more rate hikes in the months ahead, and we can expect further moderation in the property market, especially in the major Sydney and Melbourne markets. When this was last being discussed in 2019, when the Labor Government had some almost coherent tax policy reforms in their manifesto, we saw a significant fall in property listings and some price falls. Could the same happen again? If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you. Buying property, is both challenging and adversarial. The vendor has a professional on their side. Emotions run high - price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make. Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest. Shoot Ribbon an email on [email protected] & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER. Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts Please consider supporting our work via Patreon: https://www.patreon.com/DigitalFinanceAnalytics Or make a one-off contribution to help cover our costs via PayPal at: https://www.paypal.me/MartinDFA We also can receive bitcoins at: 13zBL1oRib9VJu8Uc9zUGNhxKDBBgUpDN1 Please share this post to help to spread the word about the state of things.... Caveat Emptor! Note: this is NOT financial or property advice!! 🚨BEWARE OF SCAMMERS🚨 As there are accounts impersonating Walk The World in the comments on YouTube, note that our comments will have a distinguishable verified symbol. And remember that we will never message you asking you to give us money or talk to us on other platforms such as WhatsApp or Telegram