Government faces pressure to scrap tax breaks that could save budget $200bn

Australia’s budget bottom line could improve by nearly $200bn if a “truly cooked” tax break was removed.

New Parliamentary Budget Office figures released on behalf of the Greens show the government is forgoing $190bn in revenue due to delayed action on winding back capital gains tax (CGT) discounts and negative gearing.

Greens leader Larissa Waters called on the government to end CGT discounts and end negative gearing handouts and redirect this money into the housing system.

“Australia is suffering the worst housing crisis in living memory, and Labor’s pathetic tinkering has only entrenched housing inequality,” she said.

“When it’s easier to buy your fifth home than your first, you know the system is truly cooked.”

According to the PBO’s findings, negative gearing and CGT discounts combined will cost the budget $15.4bn in the 2025-2026 financial year.

This is set to rise to $24bn in the next 10 years.

Since the 2015-2016 financial year, almost $110bn has been foregone.

Meanwhile, ACOSS figures show 10 of the wealthiest electorates in Australia gain a third of the benefits from these tax writedowns.

“It’s clear this tax break funnels billions into the wealthiest parts of our country at the expense of those doing it tough,” ACOSS chief executive Cassandra Goldie said.

She said this was money that could be used on essential services and social housing.

“Instead, it’s being used to supercharge inequality. That is not a fair or sensible use of public funds,” Ms Goldie said.

In a speech at the National Press Club on Wednesday, teal independent Allegra Spender, who represents Wentworth in Sydney’s affluent eastern suburbs, outlined an aggressive tax change aimed at making the system fairer – including changes to CGT.

“For generations this country has made a simple promise, if you work hard – whether you’re a teacher, a tradie, a barrister or barista – you can build a decent life for yourself,” she said.

“We are breaking that promise.

“The Australian covenant isn’t written down anywhere, you won’t find it in the constitution, but it is the unspoken deal.”

Ms Spender said the country had been changing this deal for the last 20 years.

The research follows reports Treasurer Jim Chalmers is considering changing the rules around CGT in his upcoming May budget.

Mr Chalmers has hinted at changes to the 50 per cent discount and has not ruled out changes to negative gearing.

On Tuesday, Anthony Albanese also refused to rule out an overhaul of tax reform in the upcoming budget.

Introduced by the Howard government in 1999, the concession reduces the CGT applied to an investment property by 50 per cent if the asset is held for more than a year.

Speaking to the ABC, the Prime Minister was grilled on whether his government had weighed up options to wind back the CGT concession and negative gearing to tackle intergenerational housing inequality.

A property is negatively geared when the rental return is less than the interest repayments.

Investors are able to deduct these losses from their annual income tax.

But when pressed on the issue – which could affect hundreds of thousands of property owners and investors – Mr Albanese refused to confirm or deny changes to the CGT discount.

“I’m not here to announce what might or might not be in the budget because those deliberations take place every year,” he said.

“What we’re focused on is income tax cuts. That’s our focus on the tax system, and what we’re focused on in housing is supply.”