Applying the Capital Gains Tax (CGT) to the family home will hurt the housing market and homebuyers, a property industry association has warned.
The warnings, from the Property Council of Australia, have come after think tank, the Australia Institute released a report that called for family homes worth more than $2 million to be no longer exempt from CGT and a re-think of the current 50% CGT discount on the sale of homes held for longer than 12 months.
However, according to the Property Council of Australia, removing the CGT exemption on the family home would add a significant cost to moving, reduce renovations activity and reduce new dwelling construction.
“Existing homeowners would be penalised for moving under this proposal, which would force them to stay in homes. This unnecessarily impacts older Australians who are looking at downsizing,” executive director residential Nick Proud.
“Removing CGT exemptions on the principal place of residence would penalise average families who will receive a significant CGT bill for any improvement in home values if they were to sell.
“Renovations that improve the capital value on the family home, which are vital for the modernisation and more sustainable effective use of housing, would be less likely under this proposal.”
The proposal, which could affect up to two thirds of Australia’s housing market, will also put pressure on house prices and impact the financial future of many Australian families.
“Owner occupier homes make up two thirds of the 9 million homes in Australia today and the family home is generally the savings base for retirement. This proposal would unfairly impact on people’s futures,” Proud said.
“Removing the CGT exemption on the family home would also see capital transfer into other tax favourable investments, such as shares, reducing housing availability, supply and affordability.
“The record pipeline of new homes for home buyers is finally translating to pockets of greater affordability, however removing CGT would impede new home delivery and turnover, having unintended consequences if introduced.”