The Grattan Institute has appeared before a Senate committee to argue that halving the CGT discount could fund the abolition of stamp duty. This is the policy trade everyone's been circling for years.
The proposal is straightforward. Cut the CGT discount from 50% to 25% over five years. Use the roughly $6.5 billion in annual federal revenue to compensate states for removing stamp duty on property transactions. The states hate stamp duty less than they hate losing revenue, which is why the trade matters.
Grattan's submission notes that 89% of the CGT discount benefit flows to the top 20% of income earners. The top 10% alone receive an average $86,000 annually from the discount, while the bottom 60% average $5,000. The discount cost the budget $19.7 billion in 2024–25.
Stamp duty is a transaction tax that discourages people from moving for work, downsizing, or relocating closer to family. Treasury has called it economically harmful for years. Removing it would improve labour mobility and housing turnover, though Grattan concedes it does little for direct housing supply (zoning and construction settings matter more there).
The Senate inquiry, sparked by the Greens and Coalition in November 2025, is due to report on 17 March. Labor is reportedly considering CGT changes ahead of the May budget, though no policy has been confirmed.
Critics argue that reducing the discount risks investor sell-offs and rental market disruption. Modelling from Grattan suggests negative gearing and CGT changes combined might cut house prices by around 2%, though industry groups warn 10,000 fewer homes could be built by 2030 if investor appetite drops.
Other think tanks have floated alternatives. The ANU Tax and Transfer Policy Institute prefers a 40% discount. Deloitte suggested 33% alongside broader tax reforms. Firstlinks proposed a $500,000 tax-free threshold with deductible stamp duty for investors.
The revenue arithmetic works. The political arithmetic is harder. States need compensation guarantees. Investors need transition rules. Practitioners need time to adjust client strategies. Whether any government actually does this is another matter entirely.