Why reducing the 50 per cent discount would improve the tax system
By Lucas Lewit-Mendes
Capital gains tax (CGT) was introduced in 1985 as part of reforms to broaden the income tax base and reduce the rate. CGT is leviable on the increase in the value of an asset, such as property or shares, and is levied when capital gains are realised (i.e. the asset is sold).
In 1999, the previous inflation adjustment was replaced with a flat 50 per cent discount, with the goal of stimulating investment in the share market.
The 50 per cent discount goes beyond the purpose the discount and undermines the progressive nature of Australia’s personal income tax system. The discount should be reduced to 25 per cent to improve equity and fund more effective ways to encourage productive investment.


