The impact of tax rate changes on capital gains realisations: evidence from Australia

Australia experienced a major reduction to the rate at which capital gains are taxed on the introduction of the "50% CGT discount" in the 1999-2000 fiscal year. Claims made at the time of this effective capital gains tax (CGT) rate reduction suggested it would lead to increased realisations as well as an increase in tax revenue. Using time series data from 1988-89 to 2014-15, the authors estimate the capital gains realisations response for Australian personal taxpayers. The authors' elasticity point estimates imply overall revenue losses from the introduction of the CGT discount.