A new report released on Monday by the independent think tank The Australia Institute has proposed that the capital gains tax (CGT) exemption for main residences should be scrapped for properties valued at $2 million or above.
Removal of these exemptions would result in revenues of around $12 billion over the next four years with the majority of the money coming from the nation's highest income earners. The report indicates that the exclusion of a homeowners' main residence from the current CGT, cost the budget $46 billion last year alone and, based on NATSEM modelling, Australia's poorest households received "almost no benefit" from the tax break.
AMP chairman Simon McKeon has backed the report, questioning why those wealthy enough to own expensive homes should get a "free kick".
"There are plenty of homes, particularly in Sydney and Melbourne and Perth, that you just say, why should they be exempt?" he said.
While Independent Senator Nick Xenophon said he was open to carefully calibrated changes to the CGT, a spokesman for Shadow Treasurer Chris Bowen said Labor are opposed to any changes that would see the CGT being applied to the family home.
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The next decade of decisions by our politicians will decide the future Australia with which our children and grandchildren are left when we are gone. The Turnbull Government is battling with an ever-increasing budget deficit and has suggested everything remains “on the table” regarding tax reform – and that any implemented changes would be “fair”.
The idea behind removing the CGT exemption for the main residence valued over a certain amount makes a lot of sense in the scheme of things. The super rich just keep getting richer under current legislation, and there is no reason why a $5 million house should be given the same exemption as one worth $200,000.
The report released by The Australia Institute is a good start in prompting the Government to talk about the current CGT exemption rules, but I’m not convinced that a 100 per cent removal of the exemption for those with a house valued at $1 more than $2 million is an acceptable solution. Why not investigate a 75 per cent exemption for houses valued between $2-$3 million and lower the exemption as the price increases? There certainly has to be some middle ground in the discussion.
Either way you look at it, the Turnbull Government will be forced to make some significant legislation changes before the next budget and the CGT exemption should be closely considered along with the GST and negative gearing.
What do you think? Is the removal of the CGT exemption for houses valued over $2 million reasonable? If you don’t agree with the price of $2 million, what should it be set at? Or, should there be a sliding scale for CGT exemption?
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