NSW Government Calls for Review of Capital Gains Tax Discount Amid Housing Affordability Crisis

The New South Wales (NSW) government has raised concerns about the impact of the 50% capital gains tax (CGT) discount on housing affordability, prompting a federal parliamentary inquiry led by Greens treasury spokesperson Nick McKim. The inquiry is examining how tax concessions, including negative gearing, disproportionately benefit wealthy investors and hinder first-time home buyers.

The Guardian

NSW Treasury officials submitted evidence to the inquiry, stating that the CGT discount, which applies to investments held for over 12 months, costs the federal budget approximately $23 billion in lost revenue, with $8.7 billion attributed to NSW alone. The submission argues that these tax settings amplify investor purchasing power, allowing them to bid more aggressively on properties, thereby inflating prices and exacerbating housing affordability issues.

The Guardian

Historically, lending to housing investors has surged compared to first home buyers since the introduction of the CGT discount. In the mid-1990s, lending was relatively balanced, with investors receiving about $13 billion and first home buyers $10 billion. By September 2025, lending to investors skyrocketed to $139 billion, while first home buyers only accessed $64 billion.

The Guardian

While the inquiry has garnered support from some quarters, including the Greens, it faces opposition from the Property Council of Australia. The Council cautioned that any changes to the CGT discount should not be viewed as a solution to housing affordability. They argue that such changes could lead to a decrease in new housing construction, further driving up rents and negatively impacting the economy. Their submission emphasizes the need for a comprehensive national review of property-related taxes and regulatory frameworks instead.

The Guardian

Federal Treasurer Jim Chalmers has indicated that the government currently has no plans to alter CGT or negative gearing rules. McKim has welcomed the NSW Treasury's submission, asserting that it strengthens the case for reforming what he describes as "the most unfair tax break in the country." The inquiry is set to hold public hearings and deliver its final report by March 17, 2026.

The Guardian

The ongoing inquiry into the CGT discount is expected to intensify discussions around housing policy in Australia, particularly as the Albanese government prepares for the next election. The outcomes could lead to significant changes in tax policy, potentially reshaping the landscape of property investment and housing affordability in the country.

The Guardian