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Australia’s 50% CGT discount: Policy oversight?


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.

Author profiles

John Minas
John is a Senior Lecturer, Tasmanian School of Business and Economics, University of Tasmania, and Adjunct Research Fellow, Griffith Law Futures Centre. - Current at 20 April 2020
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Dr Brett Freudenberg CTA
Brett is a Professor – Taxation at Griffith University (Australia). Brett is known for his research expertise in the tax law and policy issues facing private enterprises, as evidenced by his Fulbright Scholarship (2006) and over 70 refereed publications in leading Australian and international journals. In 2020, he was awarded the national ATTA-Hill medal in recognition of outstanding contribution to Australasian tax policy and tax teaching. Professor Freudenberg’s research has analysed whether Australia should introduce a tax flow-through company, the tax treatment of discretionary trusts and the motivation for choice of business structure. His research has also considered the tax issues confronting private enterprises, reforms for enterprises in the arts sector, as well as to facilitate Islamic finance. Professor Freudenberg’s research has informed government policy as he was invited to present his PhD research findings to the Australian Treasury as part of the Henry Tax Review. Also his PhD was awarded the CCH-ATTA Doctoral Prize which saw it published as a book in 2011: Tax Flow-Through Companies. Brett is passionate about education being a transformative process, and his effectiveness as a teacher has been recognised through five national awards (including the award of two Australian Learning and Teaching Council citations: 2008 & 2011). - Current at 17 April 2020
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