The NSW government has urged the federal government to abolish or reduce the 50% capital gains tax discount, arguing it encourages investor activity at the expense of people trying to buy a home. Treasury estimates the concession costs $23 billion a year nationwide, including $8.7 billion in lost revenue from NSW, based on figures released on January 15, 2026. Premier Chris Minns has backed reform, saying changes are needed to better support first-home buyers, a position shared by the Grattan Institute, which argues the discount more than offsets inflation and fuels debt-driven housing demand.
Housing Crisis Fueled by Tax Break
When the capital gains tax discount was introduced in 1999, it was meant to encourage investment. Over time, critics say it helped turn housing into a wealth strategy, with prices climbing two to three times faster than wages. Today, investor lending makes up a large share of new housing finance, leaving many families struggling to compete. NSW Treasury says there is a strong case for reviewing the policy, arguing it skews the market and mainly rewards high earners, with the richest 10% taking most of the benefits. Support for reform appears widespread, with surveys showing more than seven in ten workers back cuts to the discount.
$23bn Revenue Cost to Nation
Every year, about $23 billion in potential tax revenue is lost nationally through the capital gains tax discount, funds that housing groups say could help ease the shortage of homes. NSW alone misses out on $8.7 billion, a significant hit as the state grapples with a worsening housing crunch. Parliamentary Budget Office modelling suggests there may be a way forward: end the discount for new property purchases after 2024, keep existing investments grandfathered, and channel the savings into public housing, all without sending property prices into freefall.
Reform Path and Political Hurdles
Calls to review the capital gains tax discount are growing, with Treasury questioning whether the policy still does what it was designed to do. Mortgage brokers say winding it back may help, but warn it will not fix the housing shortage on its own unless negative gearing is also addressed. Despite strong lobbying from the property sector, Labor is expected to consider changes after the election, encouraged by NSW Premier Chris Minns, who has been pushing for action at the federal level.
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