PM confirms Treasury will release discussion paper for further input on CGT changes, federal politics update

The Australian Council of Social Service (ACOSS) has said concerns about the federal government’s proposed changes to capital gains tax (CGT) rules affecting charities are legitimate and should be taken seriously. The comments were made during a Senate inquiry examining the impact of the planned overhaul of the 50 per cent CGT discount.

Philanthropy Australia has raised alarms that the changes could have unintended consequences for charitable giving. It argues that some wealthy donors use money made from capital gains to support charities and religious organisations, and that reducing the tax discount may discourage them from making donations. The organisation says the reform could therefore affect the flow of private money into the not-for-profit sector.

ACOSS policy director Peter Davidson told the inquiry that he does not believe higher taxes on wealthy people will automatically make them less generous. However, he said the specific concerns raised about the effect on donations should still be considered carefully.

“We’re not concerned that people who are wealthy might become less wealthy as result of tax increases and therefore less inclined to donate to charity,” Dr Davidson said.

He added that essential community services and income supports should primarily be funded by government, not by philanthropy. According to ACOSS, while charitable giving plays an important role, it should not be relied on to provide core services for people on low incomes.

“The community services and income supports, on which people on the lowest incomes rely, are predominantly and correctly come from government,” he said. “We shouldn’t be relying on philanthropy to fund essential services and income supports, though philanthropy has an important role.”

ACOSS also acknowledged that a valid concern has been raised about how the tax change could interact with deductible gift recipient, or DGR, tax deductions. Dr Davidson said that imposing a minimum tax rate on income from capital gains may “wash out or displace” some DGR deductions, which could have practical implications for donors and charities.

The debate forms part of a wider discussion about how to balance tax policy, fairness and the role of philanthropy in Australia. Supporters of the change argue that the CGT discount is a tax concession that should be narrowed, while critics warn that it may reduce incentives for giving among high-income Australians.

For charities and religious groups that depend on large donations, the issue is being watched closely. While ACOSS did not endorse the claim that wealthy donors would become less charitable overall, it said the possible administrative and structural impacts on donation patterns deserve scrutiny as the government considers the reform.

The Senate inquiry is expected to weigh whether the tax changes could affect not only revenue collection but also the funding landscape for charities, community organisations and the broader not-for-profit sector.