There's a lot of talk about the government plans to tax unrealised gains in superannuation, why no talk about the unrealised (and largely unearned) gains in property.
Hey Cameron, have you looked into Victoria's "windfall gain tax" (WGT)? Appreciate its early days (enacted in 2023) but it might be a good example of how difficult it is to design upzoning taxes correctly. Most commentary (admittedly from industry) suggests that Vic WGT is resulting in increased landbanking and reduced new land supply.
Agree that land taxes tend to encourage highest and best use, but needs to be balanced with reality that many owners in high value locations are asset rich & cash poor - therefore politically unpopular. As Darryl Kerrigan famously said "Tell em they're dreaming"!
I did look into it and there isn't really enough evidence of anything yet. I get why the industry hates it, especially if/when players get tipped off about upzoning before it is publicly announced.
The design of a WGT is really important because as you note it can increase landbanking and reduce land supply but if you have a WGT and increase land tax when these sites are upzoned then it makes landbanking harder.
Any WGT should only be payable on the sale of a property but there are loopholes there too that need to be closed. For example a developer could just develop the site in a JV with the landowner. So design will be tough
You just know the industry would lobby very hard against a WGT but when talking about the need for housing we need to be removing red tape to help people build but also be giving them the nudges to then bring that stock to the market.
Yep, tax design is made more difficult with the delivery system inefficiencies (well documented - e.g planning, gold plating of services/infrastructure, construction red/green tape etc.) and also the fact that governments love high and rising property prices (more tax). You may well get more housing, but no one will be able to afford it...
Hey Cameron, have you looked into Victoria's "windfall gain tax" (WGT)? Appreciate its early days (enacted in 2023) but it might be a good example of how difficult it is to design upzoning taxes correctly. Most commentary (admittedly from industry) suggests that Vic WGT is resulting in increased landbanking and reduced new land supply.
Agree that land taxes tend to encourage highest and best use, but needs to be balanced with reality that many owners in high value locations are asset rich & cash poor - therefore politically unpopular. As Darryl Kerrigan famously said "Tell em they're dreaming"!
Hi Hugo
I did look into it and there isn't really enough evidence of anything yet. I get why the industry hates it, especially if/when players get tipped off about upzoning before it is publicly announced.
The design of a WGT is really important because as you note it can increase landbanking and reduce land supply but if you have a WGT and increase land tax when these sites are upzoned then it makes landbanking harder.
Any WGT should only be payable on the sale of a property but there are loopholes there too that need to be closed. For example a developer could just develop the site in a JV with the landowner. So design will be tough
You just know the industry would lobby very hard against a WGT but when talking about the need for housing we need to be removing red tape to help people build but also be giving them the nudges to then bring that stock to the market.
Yep, tax design is made more difficult with the delivery system inefficiencies (well documented - e.g planning, gold plating of services/infrastructure, construction red/green tape etc.) and also the fact that governments love high and rising property prices (more tax). You may well get more housing, but no one will be able to afford it...