Capital gains tax in the spotlight

Treasurer Scott Morrison could rake in billions of dollars of extra revenue if property tax breaks were removed, according to a new think tank report.

The federal government would gain $46 billion per year if the capital gains tax (CGT) exemption on the primary residence was removed, according to The Australia Institute.

Ending the exemption solely for homes worth more than $2 million would raise about $11.8 billion, even though such properties represent less than one per cent of the national total, the report said.

The report also found that the tax break is inequitable, with the wealthiest 30 per cent of Australians gaining 68 per cent of the benefit.

Executive director Ben Oquist said CGT should be a target for any serious tax reform in 2016.

“Limiting CGT exemption to houses under $2 million would be good for the budget, the economy and equity in Australia,” he said.

However, First National Real Estate chief executive Ray Ellis said cutting the exemption on homes worth more than $2 million could be the “thin edge of the wedge”.

“Today’s $1 million properties are the future’s $2 million properties, so while the proposal may seem unlikely to affect average Australians now, it certainly has the potential to affect many Australians in Sydney and Melbourne,” he said.

“Sydney today has 302 suburbs where houses and apartments have a median price of $1 million. That’s double what it was five years ago. In Melbourne today, one in five suburbs have a median price of $1 million.”

[Related: 'Case for reviewing negative gearing exists': RBA]

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