NSW urges review of 50% capital gains tax discount over housing affordability

The New South Wales government has told a federal parliamentary inquiry that generous capital gains tax (CGT) rules have pushed up property prices and damaged housing affordability, arguing the 50% CGT discount benefits wealthier investors at the expense of first-time buyers. In a submission, NSW Treasury said the CGT discount costs the federal budget about $23bn in forgone revenue, of which about $8.7bn comes from NSW, and warned that “tax settings, such as the CGT discount, amplify investor purchasing power, compounding these pressures.” The 50% discount applies to investments held longer than 12 months and was introduced in 1999 by the Howard government; it has been linked in the submission, alongside negative gearing, to promoting housing as an investment mechanism rather than supporting owner‑occupiers.

NSW officials told parliament that lending to housing investors has risen sharply compared with lending to first home buyers since the discount was introduced: in the mid-1990s lending to investors and first home buyers was roughly $13bn and $10bn respectively, while in the year to September 2025 lending to investors reached $139bn and to first home buyers $64bn.

The submission also said access to the CGT discount through vehicles such as trusts “exacerbates inequality in the tax system.” The inquiry is led by Greens treasury spokesperson Nick McKim, who welcomed the submission, saying the evidence shows the discount pushes up house prices and benefits wealthy investors.

Key Topics

Politics, Cgt Discount, New South Wales, Nsw Treasury, Negative Gearing, Nick Mckim