Ato hearing and guidance: who uses the Capital Gains Tax discount most, and when deferrals are allowed
In a packed hearing room in Melbourne, Treasury and the ato unfolded two related stories: how the Capital Gains Tax discount concentrates value among the wealthiest taxpayers, and how the tax office is tightening the criteria for lodgment deferrals as deadlines approach.
Who is using the Capital Gains Tax discount the most, and why?
Treasury the Senate committee that the capital gains tax (CGT) discount — which allows individuals and trusts to pay tax on only 50% of a capital gain for assets held more than 12 months — now delivers roughly 54% of its value to the top 1% of taxpayers. Treasury noted that this share has risen from an earlier measure, when the top 1% received around 39% of the discount.
Officials explained a structural reason behind the concentration: capital gains are taxed only when an asset is realised, so gains can accumulate for years and then appear in a taxpayer’s income in a single, larger taxable event. Higher-income households are more likely to hold assets that generate those gains — shares and investment property portfolios typically held over long periods — so when sales occur the 50% discount multiplies in value with the size of the gain.
ATO officials added that trusts play a significant role in how capital gains transfer through the system. Discretionary family trusts are commonly used to hold investment assets such as shares, property and business interests; gains that pass through trusts can be allocated to beneficiaries depending on annual distribution decisions. The ATO stressed this pattern is consistent with existing tax rules.
Ato: what questions must tax agents answer before seeking a lodgment deferral?
As tax time approaches, the ATO set a clear three-step checklist for tax agents and clients seeking lodgment deferrals. First, the ATO will consider deferrals only where unforeseen and exceptional circumstances affect the taxpayer’s ability to lodge by the due date — examples cited include serious illness, unexpected staff absences and natural disasters. Tax agents must fully detail what happened, when, whether circumstances are ongoing, and why a deferral would help.
Second, the ATO emphasised that agents do not need to ask for a deferral for returns due on 15 May if clients are eligible for a 5 June concession date. The concession allows individual, partnership and trust tax returns to be lodged by 5 June without penalty, provided any required payment is also made by this date. For companies and super funds (excluding large and medium taxpayers and head companies of consolidated groups), the concession applies where both the prior year and current year returns will be non-taxable or result in a refund.
Third, where an entire accounting practice is affected, the ATO recommended seeking a supported lodgment program rather than filing multiple deferral requests. The supported program is designed to let the tax office work with practices to triage overdue and upcoming obligations, prune client lists and apply deferrals or, in some cases, suspend enforcement action. “We’ll work with you to tailor solutions based on your circumstances, ” the ATO said.
What are the broader implications for taxpayers and tax administration?
Treasury framed the CGT discount trend as reflective of wealth and investment ownership patterns across the economy: those who hold the assets that generate capital gains capture most of the concession value. For tax agents and small practices, the ATO’s updated guidance aims to reduce unnecessary deferral requests and to channel genuine hardship cases into supported arrangements.
The ATO’s recent communications also link to other internal reforms: over the past year the tax office published a vulnerability framework to guide staff in handling taxpayers facing significant hardship, and it set out factors that could persuade it to remit the General Interest Charge after complaints about a lack of clarity. These moves position the ATO to both protect revenue collection and offer clearer pathways for those in exceptional need.
Back in the Melbourne hearing room, the two threads came together: Treasury highlighted who benefits most from the CGT discount, while the ATO sharpened the questions it will ask before granting relief on lodgment timing. The conversation leaves an open challenge for policymakers, tax professionals and taxpayers alike — and for the ato, the balance between fair collection and measured leniency will remain central as recommendations proceed to the Senate.
