Liberal electorates are the main beneficiaries of the capital gains tax discount, according to new research.
The Turnbull government has persistently resisted calls to reduce the CGT discount, despite warnings that the tax concession has been distorting investment decisions and reducing home ownership, particularly among the young.
Treasury figures this year showed the CGT concession on the family home is now worth $61.5bn, almost double the $33bn lost to superannuation tax concessions.
The former Treasury secretary Ken Henry, the Grattan Institute, KPMG and the independent economist Saul Eslake are among those who have called for the tax concession be reduced.
But the treasurer, Scott Morrison, left the CGT discount alone for domestic investors in last week’s budget.
A new paper from the Australia Institute, released on Tuesday, shows Liberal electorates are getting the biggest advantage from the CGT discount.
Using the most recent tax statistics from 2014-15, the paper shows eight of the top 10 electorates that benefit most from the tax concession are held by the Liberals.
Malcolm Turnbull’s electorate of Wentworth ranks first in the country, with taxpayers receiving an average benefit of $5,387 each in 2014-15. The minister for revenue Kelly O’Dwyer’s seat of Higgins comes second, with $3,448 a taxpayer. The Liberal backbencher Trent Zimmerman’s seat of North Sydney comes third, with $2,349 a taxpayer.
When considering the average CGT discount for those who actually pay CGT, seven of the top 10 electorates are held by the Liberal party – and the average benefit is much higher. Turnbull’s electorate comes first, with taxpayers who paid CGT receiving an average benefit of $66,798 each. Kelly O’Dwyer’s seat comes second again, with eligible taxpayers receiving an average benefit of $40,620 each. The Liberal backbencher Ben Morton’s seat of Tangney in Western Australia comes third, with eligible taxpayers receiving $34,086 each.
The report, called CGT Discount by Electorate, also shows the average taxpayer benefit from the CGT discount by party representing the electorate. Taxpayers in Liberal electorates got on average $672 a year on 2014-15 while taxpayers in Labor electorates got $297 a year. Nationals electorates received the least, with $146 a taxpayer a year.
“The fact that Liberal electorates disproportionately benefit from the CGT discount might help explain the Liberal party’s opposition to any changes to the tax concession,” the paper says.
“Similarly, the fact that Labor party electorates have a far smaller benefit might help explain their willingness to make changes. What is difficult to understand is why the National party would be unwilling to consider changes to the CGT discount.
“Electorates they represent get very little benefit, and failing to make changes to the CGT discount means larger cuts to welfare, which National party electorates disproportionately receive,” the paper says.
The Turnbull government left the 50% capital gains discount untouched for domestic property investors in its budget last week. But it increased the CGT discount from 50% to 60% for residents who choose to invest in affordable housing, in an attempt to encourage the supply of cheaper houses.
It changed the rules for foreign and temporary tax residents in the budget. They will no longer have access to the CGT main residence exemption, and the capital gains tax withholding rate for foreign tax residents will be increased from 10% to 12.5%, from 1 July 2017.
The Grattan Institute found in 2015 that more than half the benefit of super tax concessions flowed to the wealthiest 20% of households.
Top 10 electorates by capital gains tax discount
- Malcolm Turnbull, Liberal (NSW, Wentworth: $5,387 a taxpayer)
- Kelly O’Dwyer, Liberal (Vic, Higgins: $3,448)
- Trent Zimmerman, Liberal (NSW, North Sydney: $2,349)
- Michael Danby, Labor (Vic, Melbourne Ports: $1,861)
- Ben Morton, Liberal (WA, Tangney: $1,848)
- Josh Frydenberg, Liberal (Vic, Kooyong: $1,748)
- Tony Abbott, Liberal (NSW, Warringah: $1,706)
- Tim Wilson, Liberal (Vic, Goldstein: $1,602)
- Trevor Evans, Liberal (Qld, Brisbane: $1,350)
- Tanya Plibersek, Labor (NSW, Sydney: $1,275)
Bottom 10
- Amanda Rishworth, Labor (SA, Kingston: $66)
- Mark Butler, Labor (SA, Port Adelaide: $73)
- Bob Katter, independent (QLD, Kennedy: $82)
- Tony Zappia, Labor, (SA, Makin: $86)
- Shayne Neumann, Labor (Qld, Blair: $89)
- Andrew Broad, National (Vic, Mallee: $90)
- David Littleproud, National (Qld, Maranoa: $94)
- Mark Coulton National (NSW, Parks: $96)
- Brian Mitchell, Labor (TAS, Lyons: $96)
- Nick Champion, Labor (SA, Wakefield: $97)
Top 10 electorates by average capital gains discount for those paying CGT
- Malcolm Turnbull, Liberal (NSW, Wentworth: $66,798 a taxpayer)
- Kelly O’Dwyer, Liberal (Vic, Higgins: $40,620)
- Ben Morton, Liberal (WA, Tangney: $34,086)
- Tanya Plibersek, Labor (NSW, Sydney: $33,098)
- Michael Danby, Labor (Vic, Melbourne Ports: $29,972)
- Trent Zimmerman, Liberal (NSW, North Sydney: $27,630)
- Trevor Evans, Liberal (Qld, Brisbane: $22,386)
- Stuart Robert, Liberal (Qld, Fadden: $22,369)
- Tony Abbott, Liberal (NSW, Warringah: $1,706)
- Adam Bandt, Greens (Vic, Melbourne: $20,918)
Bottom 10
- Andrew Broad, National (Vic, Mallee: $2,327)
- Bob Katter, independent (Qld, Kennedy: $2,699)
- Amanda Rishworth, Labor (SA, Kingston: $2,719)
- Rowan Ramsey, Liberal (SA, Grey: $2,744)
- David Littleproud, National (Qld, Maranoa: $2,896)
- Tony Zappia, Labor (SA, Makin: $2,921)
- Mark Coulton, National (NSW, Parks: $3,035)
- Dan Tehan, Labor (Vic, Wannon: $3,063)
- Mark Butler, Labor (SA, Port Adelaide: $3,247)
- Rick Wilson, Liberal (WA, O’Connor: $3,338)
