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........

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