The OECD wants to slow down housing tax breaks that benefit the rich. 

A new report by the Organisation for Economic Co-operation and Development (OECD) says capping tax breaks for housing could bring down house prices and ensure that property is not concentrated in the hands of older and wealthier Australians.

The experts say capital gains tax exemptions can disproportionately benefit higher-income and wealthier households and drain government budgets.

Australia has no capital gains tax on a person's principal place of residence. Also, the tax levied when an investment property is sold is heavily discounted.

The estimated cost of the capital gains tax exemption for main residences was $64 billion in 2021.

The OECD has made several recommendations to governments, including Australia's, including to “consider capping the capital gains tax exemption … to ensure that the highest-value gains are taxed”.

The report - Housing Taxation in OECD countries - says that in Australia and the United Kingdom, capital gains tax exemptions for the main residence are the largest tax concession.

However, removing it “would not necessarily raise the equivalent of the foregone tax revenue”.

“Additional tax revenues would depend on dynamic effects such as lock-in effects and changing house prices,” the report said.

More details are accessible here.