A government frontbencher has all but killed a proposal to apply capital gains tax to the sale of luxury homes by ruling it out before the Coalition even considered it.
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Although a spokesman for Treasurer Scott Morrison responded to the proposal by saying the government was engaged in an open debate and consulting widely, frontbencher Steve Ciobo told Sky News the proposal would penalise "the one industry that's actually providing us a strong period of growth.
"There is no magic formula – if you impose more tax, then those extra taxes simply get passed on to consumers," he said.
AMP chairman and former Australian of the year Simon McKeon has backed limiting the exemption from capital gains tax to family homes worth less than $2 million, asking why those wealthy enough to own expensive homes should get a "free kick".
Australia Institute and National Centre for Social and Economic Modelling research finds that more than half of the benefit of the tax-free status of the family home goes to the highest-earning 20 per cent of households.
The lowest-earning 20 per cent get almost nothing.
The Labor opposition has ruled out the latest tax proposal, saying family homes of all sizes will remain exempt from capital gains tax if it takes office.
Introduced when Labor imposed the capital gains tax in 1985, the exemption costs $46 billion a year, about as much as the defence bill and the Medicare bill combined.
The Treasury says the concession is Australia's most expensive, costing more than the concessions on superannuation, although they are set to overtake it in 2017-18.
At present only rented residential properties are subject to capital gains tax. Profits made from buying and selling family homes are completely exempt.
The Australia Institute says the government could raise $12 billion over four years by limiting the capital gains tax exemption to houses worth less than $2 million. More than half the additional revenue would come from the top 10 per cent of earners.
Only 1 per cent of owner-occupied homes are sold for $2 million or more.
"I really don't understand why we give such a free kick to those in the community that are lucky enough to own very expensive homes that they live in," former Australian of the year Simon McKeon told The Australian Financial Review.
"There are plenty of homes, particularly in Sydney and Melbourne and Perth, that you just say, why should they be exempt?"
Mr Morrison said the government wanted better taxes, not a bigger tax burden.
Its goal was "to create a better tax system that removes the impediments that are holding Australians back", he said.
A spokesman for shadow treasurer Chris Bowen said while Labor had ruled out applying capital gains tax to the family home it was investigating the worth of the 50 per cent capital gain tax discount and the rules that allowed negative gearing.
Should capital gains tax exemptions for family homes be removed?
Poll closed 13 Jan, 2016
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