The NSW government has urged Canberra to take a fresh look at the capital gains tax discount, arguing the long running concession is worsening housing affordability by favouring investors over first home buyers.
In a submission to the Senate select committee examining the 50% discount, NSW Treasury said tax settings including the CGT discount and negative gearing were steering money into property and boosting investor bidding power, making it harder for would be owner occupiers to compete.
The NSW document said the concession was a large hit to federal revenue, putting the cost at about $23 billion in forgone revenue with about $8.7 billion attributed to NSW.
It argued the size of the benefit and its concentration among higher wealth investors meant the current settings should be reconsidered, including the way the discount can be accessed through structures such as trusts.
NSW Treasury also pointed to a widening gap in housing finance, telling the committee that lending to investors has risen far faster than lending to first home buyers since the discount was introduced.
It cited figures showing investor lending reaching $139 billion in the year to September 2025, compared with $64 billion for first home buyers, alongside a much smaller gap in the mid 1990s.
The inquiry is chaired by Greens senator Nick McKim and is due to report by 17 March 2026. Its terms of reference include the discount’s contribution to inequality, its impact on housing markets and productivity and the use of the concession by trusts.
McKim welcomed NSW’s intervention, saying it strengthened the case for winding back the discount. But the debate remains politically fraught for Labor, which has previously resisted changes to housing tax concessions while focusing its housing agenda on increasing supply.
The federal government has faced repeated questions over whether it would revisit negative gearing and capital gains tax concessions including disclosures that Treasury had been asked to examine options in earlier rounds of debate.
The Grattan Institute has told the same Senate committee the 50% discount for individuals and trusts on assets held for more than a year is too generous and has argued it should be reduced to 25% and phased in over five years.
Property industry groups have urged caution, warning that higher taxes on capital gains risk denting investment at a time when governments are trying to lift housing construction.
Ken Morrison, Chief Executive of the Property Council of Australia, said in a media release that “The CGT discount is recognition that you should not tax people for inflation.”
The Senate committee has closed submissions and is expected to deliver its final report on 17 March 2026.
