Has the CGT discount reached its expiry date for investment property?

The government should urgently review the current capital gains tax (CGT) discount rules that apply to investments held for more than a year with a view to removing the generous discounts available to short-term investments. Has the CGT discount reached its expiry date for investment property?

The CGT general discount was introduced in 1999 as an incentive for investing in a range of capital assets, provided that the asset is held for at least 12 months. It is questionable whether this still serves its intended purpose.

The role of the discount should be to incentivise longer term investment for the creation of wealth, and as such used as a device for effective retirement planning.

Taxpayers Australia’s chief executive officer Moti Kshirsagar said that debate surrounding property investment continues to have a misguided focus.

He said that the generous CGT discounts in force today make certain types of short-term investments very attractive for investors, resulting in revenue loss for the government.

It is fundamental that interest payments incurred in the process of generating income from your investments be deductible, but this, combined with the generous capital gains tax treatments of certain short-term investments, creates a convenient tax minimisation incentive. This requires attention and debate.

“Taxpayers Australia believes that the focus on negative gearing needs to give way to a focus on how we improve the integrity of our capital gains tax system,” Kshirsagar said. “Offering people discounts on capital gains in certain circumstances creates arbitrage in our tax system and also creates an incentive for individuals to prefer certain types of investments.”

“Both major political parties should home in on these areas of policy and agree jointly to tighten the current rules rather than spend time engaging in superficial single issue debates.”

ENDS

Note to editor: If you’d like more information about this topic or to schedule an interview with Taxpayers Australia’s manager business services, Lisa Greig, please call her on 8851 4505 or Roseann Tanner on (03) 8851 4504 or email rtanner@taxpayer.com.au.

Taxpayers Australia is a not-for-profit organisation committed to a fairer and more transparent taxation system for every Australian taxpayer. Its aim is to provide taxation practitioners, superannuation professionals, small businesses and individuals with up-to-date, informative and above all understandable information about taxation – to ensure that every Australian pays the right amount of tax and not a cent more.

Taxpayers Australia is a not-for-profit organisation committed to a fairer and more transparent taxation system for every Australian taxpayer. Its aim is to provide taxation practitioners, superannuation professionals, small businesses and individuals with up-to-date, informative and above all understandable information about taxation – to ensure that every Australian pays the right amount of tax and not a cent more.

Taxpayers Australia is a not-for-profit organisation committed to a fairer and more transparent taxation system for every Australian taxpayer. Its aim is to provide taxation practitioners, superannuation professionals, small businesses and individuals with up-to-date, informative and above all understandable information about taxation – to ensure that every Australian pays the right amount of tax and not a cent more.

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