Should billionaires pay more tax? Californians will vote for whether to introduce a billionaire tax in November. In the United Kingdom, economists recently called for a net wealth tax on assets over £10 million (about A$19 million).
Australia may seem absent from the debate, but it shouldn’t be. The same question confronting other countries applies here too: should people with extraordinary wealth contribute more tax, and if so, what’s the best way to achieve it?
How do billionaires accumulate wealth?
To answer that question, it’s first important to understand that people with substantial wealth accumulate it differently from most Australians.
They use a range of structures, assets and strategies, including trusts, private companies, capital gains and tax minimisation.
Let’s take a closer look at just one of these: getting wealthier “on paper” with unrealised capital gains.
Wealth and wages are taxed differently
While most Australians receive the bulk of their income as wages or salaries, much of the increase in wealth for high net worth individuals comes from the rising value of assets they already own. Increases (or decreases) in the value of these assets are known as unrealised capital gains (or losses).
Suppose you buy a share for $1 in 2025. By 2026, its value has increased to $3. The share has generated a capital gain of $2. If you sell the share, you realise the gain. If you continue to hold it, the gain remains unrealised.
For billionaires, unrealised capital gains on shares in companies, real estate and other valuable assets, such as artwork or classic cars, account for a large share of the growth in their wealth.
For example, over the past 10 years, the wealth of Australia’s 200 richest people has grown from $197 billion to $707 billion, according to the Australian Financial Review’s Rich List.
From an economic perspective, these unrealised gains increase a person’s purchasing power just as wages do for workers. The key difference is how they are taxed, with unrealised capital gains receiving preferential treatment.
How do billionaires have lower tax rates than workers?
Unlike wages and salaries, unrealised capital gains are generally not taxed each year. Instead, they are usually taxed when the asset is sold. Deferring tax until sale provides a significant tax advantage because the investor continues to earn returns on money that would otherwise have been paid in tax.
If an asset is never sold, the owner’s wealth continues to grow, and no income tax is paid on that asset.
The ability to defer tax on unrealised capital gains (potentially forever) is one common reason why billionaires can face lower tax rates than people whose income primarily comes from wages.
So what are the solutions?
One solution would be to impose a wealth tax on individuals with very high levels of wealth, such as billionaires. Such a tax would capture wealth that has accumulated outside the annual income tax system, including unrealised capital gains.
Another solution would be to tax unrealised capital gains each year as they arise. In theory, this approach would treat increases in wealth much like wages and salaries.
In practice, however, very few countries attempt anything close to this because many assets are difficult and expensive to value, and their values can fluctuate considerably from year to year.
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The billionaire debate is therefore really a symptom of a broader issue.
Australia doesn’t just tax billionaires inconsistently; it taxes different forms of wealth and saving inconsistently across the entire economy. Fixing that broader problem would promote economic growth and make the tax system more equitable for everyone, not just billionaires.
Australia already has some wealth taxes in place, but they are limited in scope and application. Some examples of wealth taxation are:
land taxes, which are imposed on investment real estate properties
taxes on large superannuation balances over $3 million
superannuation benefits inherited by some recipients.
But the family home, one of the largest stores of Australian household wealth, remains completely untaxed – except for stamp duty on purchase – regardless of how much it is worth.
Australia also taxes income from savings inconsistently. The forms of savings that face the lightest tax treatment tend to have the highest barriers to entry, such as real estate, while some of the most accessible forms of household saving face the heaviest tax burden, such as savings accounts.
The tax system needs to be consistent
These inconsistencies impact all Australians, generate substantial inequity and discourage economic growth. The Australian government’s recent tax changes to negative gearing and the capital gains tax discount make some headway on this dimension, but more is needed.
Taxing billionaires more may be part of the solution.
But the real question isn’t whether Australia should tax wealth — it already does. It’s whether the mechanisms we have are working well. A billionaire-specific levy, on its own, won’t answer that question.
The larger and more consequential task is building a tax system that treats different forms of wealth consistently. That would do more than make billionaires pay their share; it would make the system fairer and more productive for everyone.
