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The federal government is reportedly considering changes to the discount in the lead-up to the federal budget.
The capital gains tax (CGT) discount reduces the capital gain on an asset by 50 per cent for Australian residents, provided they have held the property for more than 12 months.
The current setting means that when selling their assets, investors are taxed on only half of the net capital gain.
According to mainstream media reports, an anonymous government source said changes to the current settings were being considered ahead of the May federal budget.
However, Treasurer Jim Chalmers played down the reports while speaking to the media at Parliament House on Wednesday morning (4 February), saying the government hadn’t “changed our policy on capital gains”.
He said that while there were intergenerational challenges in housing, the government’s focus was on supply and building more homes, while there were also bigger priorities in the tax space.
Chalmers also said he believed speculation about the CGT changes was because of a Greens-led Senate committee exploring the matter.
“That committee work is ongoing, and any further changes to taxes, beyond those we’ve already flagged, would be a matter for cabinet in the usual way,” he said.
As a Senate inquiry investigates the capital gains tax (CGT) discount, a sharp divide has emerged between mortgage brokers and policy critics regarding its impact on the Australian housing market. While the NSW Treasury and groups like the Grattan Institute said the 50 per cent concession fuels speculation and disadvantages first home buyers, brokers contend that abolishing the discount would fail to address the “elephant in the room”: housing supply.
They have previously warned Broker Daily that penalising investors could inadvertently tighten the rental market and increase costs without solving structural issues like planning bottlenecks or high construction expenses. Ultimately, brokers suggest that the current debate “robs Peter to pay Paul”, shifting the burden between buyers and renters without tackling the underlying shortage of homes.
The call to scale back the discount, which the Labor Party took to the 2019 election, has been backed by several Australian unions, demanding it be lowered from 50 per cent to 25 per cent.
The Australian Council of Trade Unions (ACTU) said the 50 per cent rate favoured landlords with large numbers of investment properties and priced out younger workers from home ownership.
“The CGT has become one of the main mechanisms allowing the very rich to pay lower rates of tax by investing in the property market, while workers are being priced out of the communities they work in,” the ACTU said.
The Tenants’ Union of NSW submitted to the Senate committee, calling for its abolition within the next decade.
The union said that the discount should be reduced by 5 per cent each year for 10 years until it was removed, or a reform to negative gearing should be carried out.
“The interaction of capital gains tax discounts and negative gearing has further contributed to housing inequality,” it said.
“Both of these tax settings encourage speculation in housing investment, which, most concerning to us, is the flow-on impact this has on rental prices and quality of the housing experience.”
If the current CGT settings were to change, there could be a mass exodus of investors leaving the market, according to data from the Property Investment Professionals of Australia (PIPA).
The Investor Sentiment Survey 2025 showed that if the discount were to drop to 25 per cent, roughly half of investors said they would exit the market.
Talks about cutting CGT taxes have been ongoing for quite some time. In September, then PIPA chair Lachlan Vidler told Broker Daily sister brand Smart Property Investment that the mere suggestion of changes to CGT or negative gearing was enough to derail investor sentiment.
“These aren’t fringe concerns – they’re mainstream fears held by thousands of everyday Australians who provide rental housing,” Vidler concluded.
Homeless bodies have welcomed the reports, with Everybody’s Home spokesperson Maiy Azize stating: “Tax breaks for property investors are making the housing crisis worse and everyday Australians are paying the price. Lining the pockets of investors largely benefits higher income earners and makes housing more expensive for everyone else.
“The federal government spends billions more on property investor tax breaks than on providing rentals that people can actually afford. That is the opposite of what we need to do to fix the housing crisis.
“What matters now is whether any changes actually help fix the housing crisis. That means changes big enough to stop fuelling speculation and to free up money to build the public and community homes that Australia desperately needs – not just small tweaks that raise money for the budget.
“These reforms should be about making homes more affordable and taking pressure off people bearing the brunt of the housing crisis. We look forward to working with the government on changes that meet the scale of the crisis Australians are facing.”
[Related: Greens take aim at capital gains tax discount]