This blog is provided by Mecca Property Group.
Much of the debate around capital gains tax (CGT) reform has centred on prices. The belief is that if you reduce the discount, price growth will slow, and in turn, affordability improves.
But there is a behavioural response that is being largely overlooked.
If the CGT discount is reduced or removed, Australia may see the rise of the “never-sell” investment strategy.
Under the current system, investors receive a 50 per cent discount on capital gains for assets held longer than 12 months. The incentive is obvious. Investors commit capital for the long term, and in return receive favourable tax treatment when they eventually exit.
If that incentive changes, investor behaviour will change with it.