Liberals join push for capital gains tax change on housing

Outspoken Liberal MP Garth Hamilton says the Coalition needs to consider changes to capital gains tax on housing.

LNP MP Garth Hamilton on the hustings ahead of the May 2025 federal election. Picture: Kevin Farmer

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Moves are afoot from both sides of politics to change capital gains tax on property, including investments and where bedrooms in the family home are rented out.

Outspoken Liberal Garth Hamilton said the Coalition needed to consider changes to CGT and also reconsider how the proceeds from the sale of a retiree’s home could be placed into superannuation with better tax concessions.

Both Labor and Liberal backbenchers, as well as cabinet ministers and opposition frontbenchers, have all considered CGT reforms to help boost housing supply.

This week the Labor-aligned McKell Institute said the current 50 per cent discount on CGT for new units should be increased, while investors who purchase an existing detached house should face a reduced discount – which could help add another 130,000 homes before 2030.

NSW Premier Chris Minns said this week he would “encourage” the federal government to look at CGT as part of the “big conversation on productivity and taxes” central to the economic roundtable next month, which NSW Treasurer Daniel Mookhey will attend.

CGT concessions were introduced by the Howard government in the late 1990s in a move economists say pushed up house prices. Labor has previously sought to halve the concessional CGT.

The independent Parliamentary Budget Office says the CGT discount on residential property has cost the government $5bn a year on average between 2015-16 and 2024-25.

Mr Hamilton is the first Liberal in the new parliament to publicly push for changes to CGT in housing, but it is understood others in shadow cabinet have considered it.

“I think there are some real issues we need to address. I’m open to a discussion on CGT but we need to protect people’s hard work and investment,” Mr Hamilton said. “I’m also flexible on changing the rules on CGT for those who rent out part of their homes … the fact that families now have to rent out part of their homes shows you the future of Labor’s housing policy, though.”

CGT is paid on the increase in value of a property between when it is purchased and when it is sold.

Renting out bedrooms in the family home can trigger CGT when the property is sold.

“I think that there also needs to be flexibility with how much of the proceeds from the sale of the family home ends up being taxed in super,” Mr Hamilton said.

“One of my suburbs of Gabbinbar in Toowoomba is full of empty nesters who won’t sell because they will end up losing their pension,” Mr Hamilton said. “The schools here are even changing their catchment areas because the suburbs are full of empty nesters, not people with children.”

Former Liberal prime minister Scott Morrison campaigned in the 2022 federal election to expand the so-called Downsizer Contribution Scheme, which allows older Australians to contribute proceeds from the sale of their family home into their superannuation without affecting existing super contribution caps.

The policy reduced the eligibility age from 65 to 55, with individuals being able to contribute up to $300,000 per person from the sale of their home into their superannuation, outside existing non-concessional contribution caps.

Mr Hamilton said while the policy remains in effect under the current Labor government, more needed to be done and that Labor’s planned unrealised capital gains tax might distort the effects of this.

“You actually want people to be selling these houses and Labor’s new super tax will only disincentivise that,” he said.

Labor has set a target of building 1.2 million new homes by 2030 but leaked Treasury documents state this is unlikely to be met.

Tax is a focus for Dr Chalmers at his economic reform roundtable next month, where Commonwealth Bank of Australia chief executive Matt Comyn will be in attendance.

The bank recently argued that a corporate tax cut was not needed, and instead other non-productive taxes could be reformed.