6 November 2019

ACT Government seeks independent rates review ahead of Budget

| Ian Bushnell
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Chief Minister Andrew Barr

Chief Minister Andrew Barr wants to know the impact of his tax reforms on households. Photo: Michelle Kroll Region Media.

The ACT Government is seeking an independent analysis of the impacts of its tax reform program on households and the property market, including rents.

A tender has been released for one or more consultants to undertake the analysis, which the Government will use in the framing of the 2020 Budget when it will announce the next phase of reform.

The 20-year tax reform program began in 2012-13 and involves what the Government says is a revenue-neutral switch from insurance and conveyance duty to annual property taxes through the general rates system.

The Government says the review has always been planned and is timely given the reform program is at the halfway point.

The Standing Committee on Public Accounts report into the methodology for determining rates and land tax for strata residences also requested that the Government undertake further analysis.

Chief Minister Andrew Barr has consistently rejected the Canberra Liberals’ claims that the rate rises are hurting many sections of the community, driving homebuyers across the border and pushing up rents, arguing that ratepayers have benefited from cuts to stamp duty and other taxes and charges.

While the analysis may have been planned, it will also give the Government room to move in the Budget to assuage disaffected voters or provide an effective counter to what will be a ferocious campaign from the Opposition, which has already pledged a rates freeze.

The Government wants to know the impact of its rate rises on different sections of the community including first-home buyers, low-income homeowners, median-income homeowners, pensioners and fixed-income retirees, renters and women, as well as whether tax reform has been equitable and affected people’s ability to pay.

It also wants to see if residential property prices or property turnover are higher or lower than they would have been without tax reform, if home buyers are spending less overall on property purchases or buying higher-priced properties by adding the stamp duty saved to their purchasing budget, and whether the changes have made it easier for people to move to properties more suited to their needs, such as downsizing.

The analysis will also tell the Government if rental housing is more or less affordable and if rate rises are being passed on to tenants.

Economists have supported the ACT Government’s tax reform program and the Government has won two elections since it began but Opposition Leader Alistair Coe has put rates at the centre of his campaign for next year’s October poll.

While he has promised to freeze rates, Mr Coe has not said how he would pay for the policy.

The Government also challenged Mr Coe’s charge that Canberrans are moving across the border, saying that between 2011 and the 2016 Census the ACT gained 3946 people from NSW, releasing this table to support their claim:


Population moving into and out of the ACT between 2011 and 2016.

“The only age groups that have seen any significant movement out of the ACT are those of retirement age heading to the coast,” a spokesperson said. “Young people have been flocking to the ACT. We are one of the fastest-growing regions in Australia. Our population in 2011 was 357,220. In March 2019, the ABS estimated our population reached 425,700.”

The spokesperson reiterated that rates increases would be lower in the next phase of tax reform, with the heavy lifting complete now that insurance taxes in the ACT have been fully abolished and the payroll tax threshold has been lifted.

The tender says a final report will be due by 21 February 2020.

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HiddenDragon8:29 pm 09 Nov 19

“The spokesperson reiterated that rates increases would be lower in the next phase of tax reform, with the heavy lifting complete now that insurance taxes in the ACT have been fully abolished and the payroll tax threshold has been lifted.”

The figures in the 2019-20 ACT Budget (Budget Paper 3, p.230) show that current annual rates on residential properties would need to increase by about half, and annual rates on commercial properties by about one third, to cover the revenue currently derived from stamp duties.

That would be in addition to annual increases in rates according to the Wage Price Index which the ACT Government uses to increase many of its charges.

Obviously what constitutes “heavy lifting” is a matter of opinion – perhaps that government spokesperson is a power-lifter in their spare time.

Stamp duty was a once only tax paid when you bought a house. Too high yes, but you only paid it if you could afford the house and you then worked to pay off your mortgage . Now mortgages will be harder and longer to pay off because rising rates reduce savings.

Increasing rates by 7-11% every year means we all have less in our pocket to pay our mortgage, food, car, electricity bills, insurances, kids, holidays etc. Unless of course you are on a high salary with guaranteed pay increases (like an ACT Chief Minister). Then you can just look down upon and smirk at the plebs struggling on tight budgets in the outer suburbs. They are the ones most punished by high rates.

Raising rates are regressive and unfair because they are not based on household income or capacity to pay. The ACT now has the highest residential rates and payroll tax rate in Australia while ACT Labor and its proxies still push the deceptive line that we are living in a lala land of low taxes. We are now the most unfairly taxed part of Australia. Compare your latest rates notice with what you paid in 2011-12. Over 8 years rates have increased by +250% and are on track to triple.

So a vote for 7-11%pa increases in rates is a vote for a 7-11%pa drop in your own standard of living. How dumb is that?

michael quirk8:33 am 08 Nov 19

One can expect the “independent” rates review to recommend tweaks to the existing rates regime. The gain community confidence the Barr government also needs to justify its expenditure priorities. Its Infrastructure Plan and ACT Planning Strategy provided no such justification. Why, when there are major unmet needs in health, housing and city maintenance, for a new theatre, the upgrading of stadium facilities, is the extension of light rail to Woden a priority? Its need is not urgent, as demonstrated by the high performance of the bus service currently operating, is extremely expensive relative to the benefits provided and is a technology likely to be superseded by far cheaper high capacity electric buses within the next few years. Mr Barr stop the obfuscation, be accountable and justify your spending and revenue raising priorities.

The reform is intended to make the system fairer, according to Mr Barr, but he is simply replacing one bad tax with an even worse tax system by increasing rates and land taxes. Rates for houses and units are expected to increase, on average, by 7 and 11 per cent, respectively. Land taxes will grow, on average, by 7 per cent.

Rates rises of 7-11% pa are well in excess of wage and price increases so our disposable income is reduced. We are all worse off because we are paying more in rates. That is unfair.

First-home buyers, low-income homeowners, median-income homeowners, pensioners and fixed-income retirees, renters and women are all disadvantaged because they pay more in rates, more in property prices and higher rents because higher rates are passed on in the form of higher rents.

First-home buyers in the ACT don’t pay stamp duty on any residential property if their household income is less than $160,000. But once they move into their higher priced home they are trapped into paying annual rate rises of 7-11%, well in excess of their household income rises. If they have kids and go onto one income they are even worse off. But Barr doesn’t consider the effect on families with children.

The great ACT Government scam is that while buyers are promised less stamp duty, they pay more in rates, more in property prices, more in rents, while revenue from stamp duty has actually increased since the 20-year program begun.

You’ve hit the nail on the head. The unintended reality of the Stamp Duty changes isn’t anything like the economic model championed by economists and the likes of the Grattan Institute.

Apparently you will be better off with the abolition of stamp duty if you buy and sell a house every 7 years. This was the supposed average people in Canberra changed houses? So you only lose if you stay in your house longer.

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