Jason Rose

YES, the castle’s walls are under assault. Despite the carefully worded denials, it is likely that Dr Ken Henry’s review of the taxation system will consider a capital gains tax on family homes valued at $2 million or more.

Another submission, from a Treasury official and a Danish economist, recommends a new tax based on a notional rent for owner occupied housing.

Then there’s the proposal for land tax to be extended to principal residences.

Economists prone to social engineering are arguing that our current system narrows the tax base and rewards high-income earners at the expense of renters, low-income earners and those with few, if any, assets.

With these submissions, they believe, they have found a way to make “the rich” pay and to save the housing market from itself.

According to University of NSW professor Julian Disney: “We need an indication that there is no longer an unlimited free lunch for owner occupiers at the top end of the market.”

It is strange to think of owner-occupied properties bought with after-tax dollars as a free lunch.

Even if you do hold that view, imposing the CGT on family homes valued at more than $2million will not bring a sense of equality to the property market.

Instead, the new tax will drive price inflation in the upper tier as future vendors facing a CGT liability will try to recoup the additional impost by increasing their asking price.

If they cannot achieve a higher price, they are likely to withdraw their properties from the market — starving the $2million-plus sector of supply just as demand in this sector shows every indication that it is about to grow.

If you doubt this will be detrimental to the wider market, consider what we’ve seen with the bottom half of the market, now showing the strains of pump-priming via the boosted first-home owners grant at state and federal levels.

How, then, does a second program pushing up prices in another sector make any sense?

And, more worryingly, do these academics seriously believe that a more level playing field for all will be achieved by artificial engineering of what is supposed to be a free market based on the natural dynamics of supply and demand?

The other tax proposals may look effective in a 157-page economic paper, but I hardly think injecting more complexity into our tax code is the answer.

The state-run land tax systems based on council valuations already have plenty of problems. Call me a sceptic, but I can’t see how a national extension of these imposts to the family home will make the market any more equitable.

And the idea of charging another tax based on a notional rent is replete with challenges. How would a standard rental percentage apply to all owner-occupied property, given the notoriously varying returns between states, price brackets and suburbs? Go figure.

The real way to secure a better functioning housing market lies in governments working together to increase the supply of new housing and delivering better urban design. Mindless soak-the-rich measures will achieve nothing.

A government that adopts any of these notions will be committing political suicide — homeowners just will not buy it.

Monique Sasson Wakelin is a director of residential investment consultancy Wakelin Property Advisory