Those with a Self Managed Superannuation Fund who hold englobo land in Victoria will need a fresh accessory after the state budget: a goat to eat weeds.

Treasurer Tim Pallas has kindly extended the englobo wheeze that deems unimproved land within urban growth boundaries to be primary production land and exempt from State Land Tax to family superannuation trusts.

Earlier this month, Metricon successfully argued before the NSW Supreme Court that grazing a few cows on a valuable parcel of land awaiting subdivision made its purpose primary production and exempt from State Land Tax. This suspension of the high principle that tax drives land into use must now be set aside by fresh land tax legislation.

There is enough undeveloped land within Melbourne’s Urban Growth Boundary for 400,000 house lots, so Treasurer Pallas’ generosity is a very substantial gift to developers. He extends the utterly outrageous and backward move by former Planning Minister Matthew Guy to introduce the englobo exemption in the first place.

He has clearly put the interests of those who choose to own undeveloped land in a SMSF ahead of those who simply need a home.

State Land Tax is a small but persistent reminder to landowners to put their holdings to the best and highest use, as explained here. Victoria now blunts this useful tool by declining to tax those whose behaviour we need to influence.

The Andrews government pre-announced a doubling the foreign property buyers’ Stamp Duty surcharge and tripling the State Land Tax surcharge in this budget – evidence they well understand the damage rent-seeking creates and how to change behavior.

Oh, that newly acquired goat can be used for milk and meat, or provide a natural increase – which is taxable under Australian law.