At Per Capita’s Community Tax Summit in 2025, participants were asked to identify their top priority for tax reform. Capital gains tax (CGT) emerged as the leading response at 30 per cent, followed closely by negative gearing at 26 per cent — together representing two of the three most supported reforms. This finding is reinforced by Per Capita’s annual tax survey, where both reforms were among the most popular ways to raise revenue for improved services.
Expert opinion aligns with this sentiment. As Dr Ken Henry AC observed at the summit, “the structure of our tax system offends intergenerational equity” — a view shared by many economists who see CGT and negative gearing reform as essential to rebalancing a tax system that has, over time, favoured asset holders over wage earners.
It is against this backdrop of growing public and expert consensus that Per Capita has developed the Tax Green Paper series — a sequence of articles examining Australia’s tax and transfer system at a time when the case for reform has never been more pressing. The series will culminate in a comprehensive report on tax reform in Australia, including how the federal government can develop a fair and compelling reform package.
This first paper focuses on revenue raising options — specifically, two of the reforms that resonated most strongly with summit attendees: reducing the CGT discount and limiting negative gearing deductions. Our key recommendations are to reduce the CGT discount from its current 50 per cent to 25 per cent, and to limit negative gearing deductions to investment income only. The evidence and reasoning behind these positions are set out in this paper.