Capital gains tax discount by electorate

16 May 2017

The capital gains tax (CGT) discount is a tax concession. While personal income earned in other ways is taxed at the full marginal rate, only half the income earned from a capital gain is taxed. So if someone were to earn an additional $1,000 from extra hours at work, all the $1,000 would be taxable income. If they were to earn an additional $1,000 because they sold an asset for more than they bought it for then only $500 of that would be taxable income.

The CGT discount encourages Australians to invest in residential property which in turn increases demand for houses, making it more difficult for some Australians, particularly first home buyers, to get into the market. The CGT discount creates winners and losers. These winners and losers are not distributed evenly, either by income or geographically. The winners are more likely to be high income households who live predominantly in large cities represented by the Liberal Party. Those getting the least benefit are more likely to be low income earners living in rural or outer suburban seats, represented by the National Party or Labor Party.

In a representative democracy, geographic distribution is important as it can help inform why some policies are promoted or attacked by different politicians or parties. This paper looks at the CGT discount by federal electorate to find out which electorates are the biggest winners from the CGT discount and which electorates are getting little benefit.

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