News story 23rd Mar 2017

How far should reform of the CGT deduction on housing investment go?

A leading forum of Australian academic economists have given a mixed report card on whether the federal government should reform the 50% deduction on capital gains tax (CGT) deduction on property investment, to tackle rising house prices and an over-stimulated property market.

Housing investment

A monthly poll of economists by Economic Society of Australia Monash forum found 44.4% of respondents agreed with a statement that the tax deduction should be removed entirely (22.2 percent agreeing and 22.2 percent strongly agreeing).

However, the poll also found 40.7 percent disagreed with the statement (22.2 percent disagreeing and 18.5 percent strongly disagreeing); 14.8 percent of respondents were uncertain.

The Economic Society of Australia (ESA) Monash forum is a joint initiative between Monash Business School and the Economic Society of Australia (ESA).

The forum is designed to explore the extent to which Australian economists agree or disagree on key national and global public policy issues, through regular polling of the eminent economists on the ESA's National Economic Panel.

This month, panellists were asked whether they agreed or disagreed with this statement:

Capital gains tax deductions for housing investment should be removed because they overstimulate the housing market, contributing to rising house prices.

The academics were asked to consider the complete removal of the deduction to assess more generally the effect of capital gains taxes on the housing market.

Read the arguments for and against here.