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Have your say on vacant land tax

Tax Alert - August 2019

By John Lohrentz

Recently, the Productivity Commission has invited submissions on whether a tax on vacant residential land would be a useful mechanism to further improve the supply of land for housing. This consultation originates from recommendations made by the Tax Working Group in Volume 1 of their 2019 Final Report that the Productivity Commission should consider the suitability of a vacant residential land tax and / or a tax on empty homes in residential areas in its review of local government financing. While there are difficulties in defining vacant land, and limited revenue potential, the Productivity Commission notes that there could be benefits on land supply (i.e. reduced land banking) and therefore housing affordability. However, the Tax Working Group points out that the tax would need to encourage substantive use of residential land / homes instead of “token” efforts, and would be best implemented by local governments. It also notes that these types of taxes would appear to be most feasible in cases where a local authority has rezoned the land and provided infrastructure but the land remains vacant.

This consultation is part of the Productivity Commission’s recent draft report on Local government funding and financing, which is asking whether the “existing funding and financing arrangements are suitable for enabling local authorities to meet current and future cost pressures.” Consultation closes on 29 August 2019  and the final report is expected at the end of November 2019.

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