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Australia’s 50% CGT discount: Policy oversight?

Citation

Minas, J and Freudenberg, B, Australia's 50% CGT discount: Policy oversight?, Australian Tax Forum, 35, (1) pp. 88-107. ISSN 0812-695X (2020) [Refereed Article]

Copyright Statement

Copyright 2020 Australian Tax Forum

Official URL: https://www.taxinstitute.com.au/tiausttaxforum/aus...

Abstract

Since its enactment in 1999–2000, the 50% capital gains tax (CGT) discount has become an entrenched feature of the Australian tax system. The CGT discount is effectively a tax rate preference that, we argue, remains in place despite its tax policy shortcomings. These include that the CGT discount is inequitable from the perspective of horizontal and vertical equity, and it is inefficient in that it may encourage an overinvestment in assets that produce most of their return in the form of capital gains. This article is a critique of the CGT discount which draws on a chronologically organised analysis of the views and commentary on the CGT discount from individuals and organisations outside of government. Views and commentary on the CGT discount are sourced from the news media, submissions to government discussion papers, and other publicly available information. This article critically evaluates the policy basis and evidence for the 50% CGT discount and is, in part, concerned with whether there is an overall justification for the preference. It is argued that the justifications made by policymakers in favour of the CGT discount, at the time of its enactment, lacked sound tax policy foundations. It follows that the case for the CGT discount continuing in its current form is diminished.

Item Details

Item Type:Refereed Article
Research Division:Law and Legal Studies
Research Group:Commercial law
Research Field:Taxation law
Objective Division:Expanding Knowledge
Objective Group:Expanding knowledge
Objective Field:Expanding knowledge in economics
UTAS Author:Minas, J (Dr John Minas)
ID Code:139882
Year Published:2020 (online first 2019)
Deposited By:TSBE
Deposited On:2020-07-13
Last Modified:2021-05-19
Downloads:0

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