A report from the inquiry into the operation of the capital gains tax discount in Australia including its contribution to inequality in Australia, how it influences the types of assets purchased, its distributional effects and its role in suppressing productivity and whether this tax discount is fulfilling its original intended purpose. 

Report structure

• Chapter 1 outlines the conduct of the inquiry and provides background information on the CGTD
• Chapter 2 discusses the role of the CGTD in suppressing Australian productivity and how the discount influences investment decisions
• Chapter 3 examines the distributional effects of the CGTD and its contribution to inequality in Australia
• Chapter 4 outlines and considers options for reform of the CGTD
• Chapter 5 presents the committee's findings.

Findings

1. The committee has consistently heard that the current design of the capital gains tax discount results in a degree of concessional treatment relative to labour income which can distort decision making and incentivise tax planning.
2. The design of the capital gains tax discount has the potential to distort the allocation of investment across the economy, with evidence that existing housing stock makes up a substantial share of capital gains that benefit from the capital gains tax discount.
3. While there are a number of factors that influence housing markets, there is evidence that the concessions provided by the capital gains tax discount, in combination with negative gearing, have skewed the ownership of housing away from owner-occupiers and towards investors. 
4. The benefits of the capital gains tax discount are also unequally distributed, with implications for income and wealth inequality and intergenerational inequality.