Jacinta Allan has found yet another creative way to tax Victorians. And the best part for her is that this time they’re not fighting to stop her.

They’re actually cheering her on because they can’t see what’s happening right before their very eyes. Jacinta Allan has promised to make working from home 2 days per week a right for any workers who can reasonably do their jobs from home. She’s framing this as a win-win-win. Good for business, good for workers, good for families. What she’s not mentioning is that it’s also likely to be very very good for her state tax revenue because last year the government lowered the land tax threshold to just $50,000. And given that a median capital city home is now worth a million, that would mean that a single bedroom from that home converted into a home office could then become subject to the Victorian state government land tax. It is genius and the idiot voters are cheering her on.

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Now, Dictator Dan didn’t just trample human rights and hit kids on bicycles. He also racked up enormous state debt before he noped his way out of Victoria, leaving Jacinta Allan to clean up his mess. Thing is that Premier Allen seems to have decided to just make more mess of her own. Now, it’s worth noting that as a percentage of the gross state product, basically the state version of the GDP, the debt in Victoria doesn’t look all that high. Currently, Victoria’s state debt is only 25, excuse me, percent of the gross state product compared to up around 40% debt to GDP ratio at a federal level. So, actually, many people argue that the Victorian debt really isn’t that big of a deal.

But that’s only half of the story. The debt has to be paid and it will be paid either through taxes or through inflation or in reality it’ll be some combination of those two things. We will not get away with simply not paying this money back. And repaying debt for a state is far trickier in the Australian system than what it is for the federal government. Because when the GST was introduced, our states gave up their ability to impose their own income or consumption taxes. And those are the big taxes, income and consumption. They’re the ones that raise by far the most money. So the states have been left to rely on far smaller taxes like stamp duties, land taxes, payroll taxes, and yes, speeding fines and the like to try and make ends meet.

Which means that when a state premier like Jacinta Allan finds herself with a growing debt problem, she has to get creative. And boy is she getting creative. There’s all the taxes that she’s already passed or tried to pass. Things like the changes to the fire services levy, the vacant land tax, the windfall gains tax, the unimproved residential land tax, and the one that’s relevant to this video, changes to the land tax itself to lower the threshold at which it applies to a property. Then, of course, there’s been recent leaks about future taxes, which Premier Allen may be planning to introduce, including a state level de facto capital gains tax, but all of that is a topic for another video.

For now, we need to focus in on these changes to the Victorian state land tax and specifically the lowering of the value threshold to which that tax applies from $300,000 in value to just $50,000.

Actually, before we talk about that, we need to talk about the fact that land tax was introduced in Victoria in 2005, and the value below which it simply didn’t apply was set in 2005 at $300,000. Now, land tax isn’t supposed to apply to your primary place of residence regardless of the value. But I want to make a point here about bracket creep or what happens when such thresholds are not indexed to inflation. In 2005, the median Melbourne house price was about $350,000. So the $300,000 threshold was just a bit below the value of an average family home.

Now again, the tax didn’t apply to the family home, but I’m using that as a reference point. That $300,000 threshold was not indexed to inflation or indexed to house prices or indexed to commercial property values or index to anything. It was just fixed at $300,000 which means that over the last 20 years it has stayed at that level while median Australian or Melbourne, sorry, house prices are now over $1 million. So that threshold that used to be just a little below the value of the house is now less than 1/3 of the value of a median Melbourne home. But for most people that didn’t seem to matter because land tax didn’t apply to the family home.

But it mattered for small businesses because over time it started to apply to more and more small shops and little mechanics and small warehouses. So it mattered because today pretty much every single business with its own premises is paying land tax to the Victorian government. But for most Victorians who don’t run their own business as well, this whole thing went completely unnoticed. And then last year in 2024, the threshold was dropped from $300,000 to $50,000. Why? What warehouse or corner store or mechanics workshop wasn’t already captured in that $300,000 threshold? Find me a place where I can run a business, a shopfront or some square meterage to put some racking and put a warehouse or somewhere I can do manufacturing or frankly anything that isn’t going to cost me $300,000 or more. Are there really businesses out there with their own properties that that’s worth less than $300,000?

Why did they change this threshold? Well, because this change wasn’t aimed at businesses that have their own properties. Far from it.

It was aimed at businesses that people run from their own homes. And this is the first step towards Premier Allen’s stated desire to introduce a universal land tax, a tax that is designed to apply to everyone, including the family home. See, the way this works is very simple. If your property is worth a million dollars, which apparently now the average or median one in Melbourne is, and you have one bedroom dedicated as an office to, let’s say, your graphic design micro business, or perhaps your garage is dedicated to your 3D printing side hustle, or perhaps you have clients that come and consult with you in your front room, or any one of a million other scenarios where you do some level of business inside your home.

And if that one room or that garage in your house is worth over $50,000 and you are primarily using that room for business purposes, then hey presto, Jacinta Allan can now tax you. Now, of course, there is more to it than that. This isn’t tax advice. You need to speak to your accountant to get the details of your personal situation and circumstances and all of that. But in principle, Jacinta Allan has now found a way to tax the garage or the front room or the back bedroom of hundreds of thousands of houses in Victoria. And if you’re thinking, “Yeah, but she’ll never find out that I use my room for business.” Uh, yes, she will.

She’ll know because the ATO, the federal tax department, will tell her. Because if you’re running a small business from home, chances are you’re claiming tax deductions on some of the expenses for your home to cover the part of the house that is actually being used in business. Now, again, get tax advice for yourself, but that is a legitimate tax deduction as long as those costs really are for your business. But the fact that you’re claiming a certain percentage of your home costs, for example, perhaps a percentage of your power bills or some maintenance costs or other ownership costs as tax deductions because they were business expenses. Well, that same percentage sets the percentage of your house, which the Victorian state government will then use to calculate your land tax.

If your house is a median Melbourne house, by which I mean a million-dollar house these days,

and you’re claiming one-third of your expenses because perhaps you use the whole double garage plus an office plus another room as a spare room for, I don’t know, some kind of a home business, a side hustle that blew up and now it’s your full-time job. Well, then the state revenue office just takes that information from the ATO and sends you the bill for land tax on one-third of the value of your home. Because according to your tax return with the federal tax office, it’s no longer your primary place of residence, that portion of your house is a business.

But now we get to the absolute genius bit. See the single bedroom that is captured under this land tax now that the threshold is so low. Hm. Jacinta Allan is promising to make working from home a right for a huge number of Victorians. You see how this works? These workers will dutifully set up a home office and their accountant will tell them all about the tax deductions that are now available to them for that home office. And hey presto, the state revenue office sends them a bill for land tax. What Jacinta Allan is doing is not to help workers. It’s to expand the tax base for her land tax.

Now, let me be very clear. I am oversimplifying this enormously. I have to. This is a YouTube video. There are some legal tests and thresholds that apply over and above just the question of do you have a home office for your work from home days for your job. It is more complicated than that and it is debatable whether the land tax will apply to a pure home office that is only used as a home office for your day job. But all it would take is for Jacinta Allan to make some tweaks. And suddenly all of those workers who celebrated Jacinta helping them with her work from home legislation will suddenly be cursing her under their breath as they get billed for a whole new tax that most of them never even knew existed and certainly never thought would apply to them.

The lesson here is simple. The government is not your friend. And anytime you think it’s helping you, beware. Because a government powerful enough to give you everything you want is powerful enough to take everything you’ve got. My name’s Topher Field. This is the Topher Project and I help busy people like you to keep up with the world as it changes around us. I am 100% viewer supported. So please buy me a coffee via the button at topherfield.net and check out my books, DVDs, and merch at goodpeoplebreakbadlaws.com.

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