Wealthy Australians earn $19 billion in tax breaks – realestate.com.au

A $23.7 billion tax break has been blamed for worsening Australia’s housing crisis, with 80 percent of its benefits ($19 billion) going to wealthy Australians, leaving out renters and first home buyers.

Anglicare Australia’s report (released on Tuesday) shows that more than 80 per cent of the capital gains tax credit benefit to investors flows to the richest 20 per cent of households, while only two per cent flows to the bottom 20 per cent – “a stark illustration of how the tax system redistributes public resources upwards, supporting wealth accumulation at the top, while doing little for those at the bottom”.

Kasy Chambers, executive director of Anglicare Australia, told The Courier-Mail: “Now is the right time to tackle this issue. There has never been greater public support for action, and housing costs – both rents and house prices – have never been higher. Now is exactly the time to tackle this issue.”

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This table shows benefits received from the government in billions of dollars, by income quintile, over the period 2022-2023. Source: Anglicare Australia.

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She also rejected claims that CGT discounts were keeping rents low.

“Rental prices have risen sharply since the introduction of the CGT discount. This is confirmed by the increase in weekly rental prices over the past 25 years, and by Anglicare Australia’s own Rental Affordability Snapshot, which shows affordability has deteriorated year on year,” Chambers said. “If the argument is that these tax breaks keep rents low, the evidence shows that this approach has been failing for decades.”

The Anglicare report shows that capital gains tax relief, especially when combined with negative gearing, has turned housing into an investment play, driving up house prices and rents, while delivering the vast majority of benefits to people who already own property.

It showed that the capital gains tax cut alone cost the federal budget $23.7 billion in 2022-23, with more than 80 percent of that going to the richest 20 percent of households.

The analysis for the 2022-2023 period shows that the richest 20 percent of households will receive the lion’s share of housing-related tax benefits – more than $19 billion from the capital gains tax credit and $20.64 billion from the principal residence exemption.

In contrast, the bottom 20 per cent of households received just $0.47 billion from the CGT rebate and $3.36 billion from the main place exemption.

Ms Chambers said: “The impact of the CGT discount cannot be understood in isolation. Its most powerful effects emerge when it works together with negative gearing.”

“Together, these policies create a strong incentive to invest in real estate, not primarily for rental income, but for capital growth.”

She said investors are encouraged to push up house prices, confident that any losses they incur along the way can be written off from their income, and any gains will be lightly taxed.

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Kasy Chambers, Executive Director of Anglicare Australia

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“This dynamic favors investors over owner-occupiers, especially first-home buyers. Investors who can take advantage of tax breaks can outbid people looking for a home to live in, pushing prices higher and preventing more people from buying a home at all.”

Ms Chambers said the policy concentrates housing wealth on those who already own assets.

“Households that already own property are better positioned to acquire additional properties, benefiting from rising prices and compounding profits. Those who rent are exposed to higher rents, greater uncertainty and no opportunity to build housing wealth.”

The report states that tax breaks that mainly benefit high-income households now cost much more taxpayers’ money than income support payments for people on low incomes.

In 2022-2023, major tax breaks, including the capital gains tax credit, negative gearing and tax breaks for pensions, are estimated to cost $128 billion, compared to around $76 billion spent on the age pension and working-age social benefits combined.

“Housing should be treated as essential infrastructure, not as a tax benefit,” Chambers said.

Anglicare called for reform of the capital gains tax credit alongside other housing tax schemes, with revenues diverted to public and community housing to increase supply and relieve pressure on the private rental market. “We are encouraged to hear that the Government is looking at tax changes in the next Budget,” Ms Chambers said.

Anglicare supports the phasing out of CGT discounts over time.

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Anglicare Australia recommendation:

“Anglicare Australia recommends that the Australian Government phase out the capital gains tax credit and negative gearing. These reforms should be introduced gradually to avoid market disruption, but decisively end the use of the tax system to underwrite speculative residential investment. Removing these concessions would reduce upward pressure on house prices, improve the fairness of the tax system and help rebalance housing markets towards access and security rather than capital accumulation.”