Background: Capital gains tax, or CGT, is the tax paid on profits from selling assets like shares or investment properties. Since 1999, investors who hold an asset for more than 12 months have received a flat 50% discount on any capital gain, making long-term investing far more tax-efficient.

What happened: Now, the federal government has confirmed it is reviewing the CGT discount ahead of the May Budget. While no final decision has been made, several options are being floated, including cutting the discount from 50% to 33%, or scrapping it altogether. The announcement alone has been enough to put investors on edge.

What else: The government argues that changing the CGT discount could help improve housing affordability. But the big question remains whether tweaking CGT would meaningfully cool prices, or simply shift more tax revenue back to Canberra.

What's the key learning?

💡CGT reform might take a bit of heat out of prices… but it doesn’t solve the housing crisis. Rolling back the discount is often pitched as a fix, but evidence suggests it would only have a modest impact.

💡Economist Chris Richardson estimates reducing the CGT discount would lower house prices by roughly 1% to 4%, which is small compared to the 39% national rise in median house prices over the past five years.

💡The bigger win may be fiscal, not housing. The government estimates the CGT discount costs around $23 billion a year in lost revenue, or nearly $250 billion over a decade, meaning reform could boost tax receipts without dramatically changing affordability.