A new tax on Australia’s wealthiest landholders could raise $3 billion annually to fund stamp duty cuts for first home buyers and other owner-occupiers, according to a proposal from the McKell Institute.
The “Extreme Land Wealth Levy” would apply only to individuals with national land portfolios valued above $20 million – targeting roughly the top 1 per cent of households by wealth.
Under the proposal, every dollar raised would be returned to states and territories on a per capita basis, with funds conditional on stamp duty rate cuts for purchases of new dwellings that will be a principal place of residence.
“The wealthiest landholders pay more, and people buying new homes pay less,” the report states.
The levy would be charged at 0.75 per cent on land value between $20 million and $50 million, and 1.25 per cent above $50 million.
It would apply to unimproved land value only – meaning the buildings on the land aren’t counted.
Family homes would be exempt unless the land value alone exceeds $20 million. Land used for genuine agricultural production would also be excluded, as would build-to-rent developments and land actively being developed for housing.
The McKell Institute estimates the levy would reduce total stamp duty collected by states by approximately 10 per cent.
“High-value landholding is now a key driver of rising wealth inequality,” the report states.
“Irrespective of motivation, ultra-wealthy landholders have accumulated hundreds of billions of dollars in unearned capital gains from rising land values. These gains remain inadequately taxed, while workers pay an average 24 per cent rate of income tax.”
The proposal addresses what the authors describe as a systematic data gap in tracking land wealth.
Currently, state land taxes don’t account for ultra-wealthy individuals with portfolios spread across multiple states.
The levy would require states to share data with the Commonwealth to enable national aggregation.
States that refuse to participate would forgo funding for stamp duty cuts – creating a strong incentive to cooperate, according to the report.
The Institute acknowledges political challenges.
“Many Australians think property tax breaks are normal tools for getting ahead and fear that any reform will personally impact them,” the report states.
“By deliberately targeting extreme high wealth individuals, we are demonstrating clearly that this is not a tax on average people seeking financial security for their families.”
Australia previously had a national land tax from 1910 to 1952, which was abolished due to high collection costs.
The current proposal aims to reduce costs by using existing state land tax assessment systems.
The McKell Institute’s Chief Economist Alison Pennington and Economist Thomas Probst authored the report, which also explores broader wealth tax options including closing the capital gains tax discount and taxing inheritances.
