A public policy company has proposed a radical overhaul of Australia’s taxation system which would target the country’s “ultra-wealthy landholders” with the aim of cutting stamp duty.
The McKell Institute has proposed an ‘Extreme Land Wealth Levy’ which would apply a national levy on individuals and their spouses holding land portfolios valued at $20m or more, with all revenue returned to states to fund stamp duty cuts for first-home buyers, movers and downsizers who buy new dwellings.
According to the McKell Institute, this levy would apply only to the top one per cent of households by wealth and would raise approximately $3bn a year that could help fund cuts to stamp duty charges.
Under the proposal, property investors would not receive stamp duty reductions.
McKell Institute chief economist Alison Pennington. Picture: X
McKell Institute chief economist Alison Pennington said the concentration of land wealth among a small group of individuals, a key driver of wealth inequality in Australia, demanded a policy response.
“Average workers are forced to hand over one-quarter of their pay packet every fortnight, while ultra-wealthy landholders quietly accumulate millions of dollars in unearned gains that remain untaxed for decades,” Ms Pennington said.
“Average working people can’t be expected to swallow this indefinitely.”
Ms Pennington said the ELWL would be “meaningless to the ultra-wealthy” individuals affected, but would make “a real difference” to homebuyers struggling to afford their home.
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The proposed levy would tax Australia’s “ultra wealthy landholders”
The levy, according to The McKell Institute, would operate using existing state land valuation systems and apply to land value only, not buildings or improvements.
A person holding a land portfolio with an assessable value of $21m would pay $7,500 per year towards the levy, while a portfolio with an assessable land value of $50m would attract $225,000 per year.
Under the proposal, principal places of residence would be exempt, unless their land value exceeded $20m.
The scheme would also exclude Genuine primary production land and qualifying build-to-rent developments.
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The McKell Institute say their proposal would generate approximately $3bn towards cutting stamp duty annually.
Ms Pennington said the proposal addressed a “fundamental unfairness” in the tax system.
“The rise in land values is largely due to collective investment by taxpayers through public infrastructure, services and the productive effort of local workers, but the benefits are unfairly privately retained.
“This surcharge would return some of that value to the public,” she said.
Ms Pennington said Australia already had a “world-class form of wealth tax” in state land taxes.
“What’s missing is a national system to account for ultra-wealthy landholders exploiting trusts and company structures to avoid tax, often with portfolios spread across multiple states.
A tax on land, Ms Pennington said, can encourage landowners to develop vacant or under-utilised land, increasing housing supply.
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