Cutting tax exemptions on households will hike revenue to $46b: Reports

The Australia Institute released a report on Monday, stating that more than half of the CGT exemption advantage was being enjoyed by households belonging to top 20 percent of incomes.

The new Capital Gains Tax report was based on the dataset provided by the National Centre for Social and Economic Modelling. According to the report, cutting tax exemptions for houses more than $2 million will help generate closely $12 billion revenue in more than four years, as estimated. It stated that almost half of the axed capital gains tax exemptions are expected to come from the highest income groups across Australia.

The report stated that the cut in tax exemptions would help Prime Minister Malcolm Turnbull to keep his promise of making taxation reforms fair for all groups of people. The prime minister’s promise came following News Corp’s revelation that similar CGT concession offered to some homeowners was prompting loss of revenue to around $24 billion in the past five years.

The report suggested that the exclusion of homeowners’ main residential place from CGT exemption led to budget disturbances of up to $46 billion, which was expected to continue to $189 billion in the next four years. In addition, the report also advocated the poorest households being exempted from the benefits of tax breaks.

“Almost 90 percent of the benefit goes to the top half of income earners, while the bottom half only get 11 percent. High income households (those in the top 20 percent) get more than half of the benefit (55 percent),” the report stated. “This policy change (would) impact on less than one percent of home sales while still raising $11.8b over the next four years,” it added.

Australia Institute Executive Director Ben Oquist said that the CGT exemptions for primary households at an annual loss of $46 billion prompted the government to pay more than what it spends on its entire defence or aged people’s pension schemes. He told the ABC that it would not be appropriate to exclude exemption from tax reform. He added that such a move would impact a very small proportion of population.