‘Ultra-wealthy’ land tax could raise $3bn per year to slash stamp duty

The “Excessive Land Wealth Tax”, which will apply to just 4630 Australians, will raise nearly $3 billion a year to reduce stamp duty on new home buyers, under an explosive new proposal from a leading Australian think tank.

The plan, unveiled Wednesday by the McKell Institute, aims to impose a tax on ultra-wealthy landowners — the top one percent of households by wealth — with portfolio values ​​of $20 million or more.

The McKell Institute estimates that nearly $3 billion a year could be raised by taxing land valued at $20 million to $50 million at just 0.75 percent and land valued at $50 million or more at 1.25 percent.

These funds under the scheme will be reinvested into states and territories on a per capita basis, provided they are used to reduce stamp duty rates for new home buyers; investors will be excluded.

Alison Pennington, Chief Economist at the McKell Institute, said the concentration of land wealth among just a small group of people in Australia was a key driver of rising wealth inequality.

“Average workers have been forced to hand over a quarter of their pay packet every two weeks, while ultra-rich landowners have been quietly collecting millions of dollars in unearned profits, remaining untaxed for decades,” Ms Pennington said.

“An extreme Land Wealth Tax would be meaningless to the ultra-rich individuals affected, but would make a real difference to homebuyers struggling to afford their homes by reducing stamp duty while increasing supply.”

According to the plan, a person with a land portfolio of $21 million will pay only $7,500 a year.

Meanwhile, someone with $50 million could pay up to $225,000 a year.

Ms Pennington said such a measure would eliminate “fundamental injustice” in the tax system.

“Australia already has a world-class wealth tax on state land taxes,” he said.

“What is missing is a national system to account for ultra-wealthy landowners who exploit trusts and corporate structures to avoid taxes, often with portfolios spread across multiple states. ELWS solves this problem.

“A land tax would not result in less land being available and would not penalize improvements or productive investment. In fact, it could increase housing supply by encouraging landowners to develop vacant or underused land.”

The proposed tax would be administered by the Commonwealth using existing state land valuation systems.

This would only apply to land value, not buildings or improvements, according to the McKell Institute.

Primary residences will be excluded unless the land value exceeds $20 million and primary production land will be excluded unless considered a hobby farm.

Qualified build-to-rent projects will also be exempt from this regulation, as the land is actually developed for new housing and a “time-limited deferral” can be achieved.

Stamp duty has become a focus for federal, state and territory governments in recent years in the face of a worsening housing crisis and rising wealth inequality.

In NSW, the First Home Buyers Assistance Scheme provides full exemption or a reduced transfer tax rate to eligible first home buyers.

The federal government also introduced a five per cent deposit scheme in which the Commonwealth essentially became the guarantor for eligible home buyers.