First broad income tax, with a land tax, by an Australian colony a key move in 1884 by South Australian government

“Big" Ben Rounsevell, as treasurer in John Colton's South Australia government, that also had future South Australian premiers Charles Kingston (top right), as attorney general, and Thomas Playford II (bottom right), commissioner of public works and grandfather of the 20th Century premier, in its ministry, steered through the South Australian Taxation Act 1884.
Images courtesy State Library of South Australia

South Australia's government, after seven years and five attempts, passed laws for the first broad-based income tax of the Australasian colonies in 1884. It was imposed with a land tax.

The South Australian Taxation Act 1884 Section 9 imposed tax on all income except for companies, public bodies and societies that didn’t carry on any business for the benefit of shareholders or members and the income of all friendly societies but not specifically charities. Section 7(III) exempted land used solely for any religious or charitable purposes from the land tax.

The need for an income tax reflected a change in government sources of revenue. Forty years earlier the South Australian government had been gaining revenue from fees for land grants. By 1884, most saleable land had been sold. South Australia also raised revenue from customs duty but, by 1884, South Australia’s population had significantly increased and, after severe droughts, greater government revenue was needed to support its services.

The June 1883 budget presented by Lavington Glyde, treasurer in John Bray’s government, showed a probable deficit of £254,000 for 1883-84. He proposed a duty of one penny in the pound on the actual value of all real and personal property in the colony, excepting all below £500. The proposal was severely criticised by Ben Rounsevell, John Colton and others, and it was agreed that the tax should be a halfpenny in the pound. The arrangement fell through and the government brought in a bill for a tax of a halfpenny in the pound, sixpence in the pound on incomes derived from invested capital, and threepence in the pound from trade and professional incomes.

In February 1884, when the parliament resumed, the Legislative Council (in the interests of the richer class) threw out the Income and Property Taxation Bill and, in the same spirit, added an amendment to the Land Bill giving substituted residence-selectors, land speculators or rich capitalists in Adelaide the same concessions as to bona fide personal residence-selectors. The House of Assembly refused to accept the amendment and the bill was abandoned.

South Australia’s next parliament was the first under the new Electoral Act, with the House Assembly numbering 52 (including about 20 new) members. John Colton soon moved a vote of no confidence in the Bray government. Colton became premier of the new government with Rounsevell as treasurer, Charles Kingston attorney general, Jenkin Coles commissioner of crown lands, Tom Playford II commissioner of public works, and Richard Baker justice and education minister.

Facing a deficit of £436,658. the Colton government at once announced a curbing any extravagance on public works, including spending on the jubilee exhibition.

Early in September, Rounsevell as treasurer moved that the House of Assembly agree to:
• a tax of one halfpenny in the pound on all land in the colony, not including the value of the improvements upon it;
• threepence in the pound on all trade or professional incomes, and
• sixpence in the pound on incomes derived from any other source.

Supporting his proposal, Rounsevell said the total estimated value of land of Adelaide was £14,000,000, out of the £65,000,000 for all the land in the province not in the hands of government. Frontages in King William Street were set down at £325 a foot value; in Hindley Street, £125; in Grenfell, Currie, and Waymouth Streets, £100; in Gouger Street, £50; and in Gillies and Gilbert streets, £15.

Rounsevell’s bill was passed except to exempt all land used for religious, charitable, and institute purposes from land tax, and the income of friendly societies from the income tax.

Other colonies/states later followed with income taxes: New South Wales and Victoria (1895), Queensland and Tasmania (1902) and Western Australia (1907).