Australia’s tax system prioritises capital, sets ‘foundation of inequality’, expert warnsNathan SchmidtNewsWireMon, 23 February 2026 9:50AM
A controversial tax concession is prioritising capital wealth over the labour force and setting the “foundation of inequality”, an expert has warned.
Despite stating otherwise, the Albanese government is understood to be probing potentially scaling back some of Australia’s lucrative concessions to capital gains tax.
Capital gains tax is a levy applied to the profits after selling items, like shares or property and is part of a person’s annual income tax. A discount of 50 per cent is given if someone has held the asset for more than a year.
The operation of that discount is being investigated before a Senate Select Committee hearing in Melbourne on Monday.
Alan Kohler, financial journalist and author, told the committee the current tax system sent “a clear signal that capital income is preferred over labour income”.
“I think that is one of the foundations of inequality in Australia,” he said.
Currently, capital gains tax is “over adjusted for inflation”, while income tax is not, he said.
Mr Kohler said Australia’s tax system “goes too far in preferring capital over labour”, in particular because capital was more “mobile”.
“Over the past few decades, capital has become very mobile,” he said.
“There’s been a shift everywhere towards taxing labour more than capital because capital is so mobile, particularly within the digital age all these companies can locate themselves anywhere, and also rich people tend to be more mobile, perhaps, than they have been in the past.
“I think that has probably led to inequality, because capital income is by definition earned by rich people, labour income is earned by less rich people.”
Mr Kohler said even for married couples, the 12 years on average it took to save for property was “impractical”, and that it often came down to the extent of their parents’ real estate holdings – or lack thereof.
“I think that a lot of young families are really struggling because of the size of their mortgage and the cost of everything else, so parents are having to step in and help with school fees or other things like childcare and so on,” he said.
“That inequality is being perpetuated by the fact that if you don’t have parents who own property, if your parents are renters, then you’re really stuck.”
Mr Kohler told the committee the 50 per cent capital gains discount is “more than it needs to be to adjust for inflation” and had encouraged investing.
In doing so, it increased the demand for property “and probably more importantly, it increased what investors were prepared to pay for property”.
“It increased the amount of money that investors were prepared to bid at auctions,” he said.
The 50 per cent discount also had “a psychological impact”, and could be halved while still staying ahead of inflation, he said.
Mr Kohler said income tax scales should be indexed.
“We can probably have an argument about whether capital gains needs to be adjusted for inflation at all,” he said.
“I mean, what’s CPI got to do with capital gain? … It seems to me the balance needs to be addressed.”
Originally published as Australia’s tax system prioritises capital, sets ‘foundation of inequality’, expert warns
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