9 February 2023

Payroll tax revenue outstrips rates money as Territory puts land tax dodgers in its sights

| Claire Fenwicke
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Andrew Barr

Chief Minister and Treasurer Andrew Barr outlining the new forecasts in the mid-year budget review. Photo: Claire Fenwicke.

Lower Territory debt, higher revenue but also higher costs – they’re some of the details released today (9 February) as part of the ACT Government’s 2022-23 Budget Review.

An extra $50 million could also be found over the next four years as the government cracks down on people renting out their principal residence.

The review has updated the figures from the 2022-23 Budget Estimate, showing the ACT is now forecast to be $461.5 million in debt, an improvement of $21.5 million. This is also forecast to be lower every year of the forward estimates and is a cumulative improvement of $261.3 million over four years.

Chief Minister and Treasurer Andrew Barr said the main factor driving the Budget’s improved position was increased revenue from GST, particularly through 2022.

“There was a lot of money that had been saved by households during the pandemic and during lockdowns that they then went out and spent on goods and services that were taxable under the GST,” he said.

“Our strong labour market and near-full employment has also seen payroll tax go ahead of rates as the Territory’s single largest own source of revenue stream.

“I think that’s probably the first time in the Territory’s history the payroll tax has taken the number one position as the largest source of revenue for the Territory government … in recent times, this is a new trend.”

According to the Budget Review, total revenue is expected to be $318.7 million higher in 2022-23 and $969.7 million higher over four years to 2025-26 than previously forecast.

Own-source taxation revenue, including payroll tax, increased by $125.8 million in 2022-23, while there was an estimated $89.5 million increase in GST revenue.

However, there will be lower Suburban Land Agency, City Renewal Authority and Icon Water dividends and income tax equivalents of $29.6 million in 2022-23, but an increase of $59.9 million over four years.

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The ACT population will increase to half a million people by 2027 and while a larger population delivers more GST revenue, it also means more needs to be spent to deliver services.

Total expenses in 2022-23 are expected to be $257.6 million higher than forecast and $614.5 million higher over the four years to 2025-26.

New infrastructure projects announced as part of the Budget Review include additional funding to support the design and construction of the John Gorton Drive and Molonglo River Bridge, upgrading energy infrastructure to supply the Woden and Tuggeranong bus depots and support the operation of up to 300 battery electric buses, additions to the Canberra Hospital expansion and the relocation of the Southside Child and Adolescent Mental Health Service.

Land tax revenue is expected to be $17.4 million higher in 2022-23 and $59 million higher over the four years when compared to the Budget Estimates.

Of that, $50 million of additional revenue is expected from cracking down on people dodging land tax, such as those who had declared a home as their primary residence but are, in fact, renting them out.

Mr Barr said there was a lot of property data available online which would let the government know who wasn’t declaring land use correctly.

“It doesn’t take too much sleuthing to match up rental databases, publicly available, with information on ‘is that property currently on the land tax system’,” he said.

“The advice to me from our revenue office was that there was a need for some additional resources to focus on compliance in this area.

“If there is a leakage in the tax base, it means those people who do the right thing are paying more than they should.”

Mr Barr also said the government would be going further with stamp duty cuts in upcoming budgets.

“The housing market was overheating last year, and so … we’re expecting the impact of interest rate increases to reduce the turnover in terms of properties on the market,” he said.

“As prices have been falling quite substantially, there is a link between property value and stamp duty collected, so the forecast for residential stamp duty collections is that they will continue to decline.

“That’s the nature of the housing market and substantially why we’ve been moving away from stamp duty as a source of revenue because it goes up and down depending on the housing market.”

Rates will rise but only through inflation.

They’re currently scheduled to be raised by 3.75 per cent.

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One key risk to the economic outlook is rising interest rates and the uncertain impact of how high inflation will hit household budgets.

As the cost of living continues to bite, Mr Barr said it was possible relief for Canberrans would need to take priority over budget repair.

“We might need to increase the amount we put into a number of measures,” he said.

It’s hoped negotiations with the Commonwealth would provide some of that monetary relief through bilateral agreements.

Mr Barr was optimistic that even if a recession occurs, as predicted by some economists, the ACT would be well protected.

“I think the ACT has proven to be more resilient and somewhat counter-cyclical,” he said.

“If the economy does look like teetering on the edge of a recession, then a number of economic stabilisers kick in, such as Federal government spending and that tends to flow through our economy first.”

The 2023-24 Budget will be delivered in June.

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The Chief Minister is smiling. Watch out Canberra, an economic Winter is coming.

HiddenDragon7:50 pm 10 Feb 23

This good news spruik is part of the annual budget pantomime that has been going on for many years.

The next part of the cycle, which will come later this year when the next annual budget drops, will be a variation on the theme of “imagine our surprise when we discovered that unforeseen (by people who most definitely did not want to foresee them) costs have more than offset the improved budgetary position announced earlier in the year”.

But the bad news later in the year will be camouflaged with lots of waffle about “investing” in this, and “strengthening” that, and “building better” something else, so the slippery slope to fiscal unsustainability for the ACT won’t be anything to be concerned about, will it…….?

I’m Not too surprised that payroll tax is so high. Mr Barr talks about the ACT government’s high exemption for companies before they start having to pay payroll tax. But it’s an artificial exemption. ACT has introduced lots of employment and business regulations, restrictions, controls and insurance compliances that force small companies and sole traders to work via another company. This means you can’t claim a payroll tax exemption even if you do all the work yourself.

Despite living in Canberra for a few decades I couldn’t prove myself a Canberra based worker and had to go through a middleman company who’d registered for this criterion. Another contract where I was the only person doing the actual work for ACT government needed a range of executive positions, occupational services and insurances that a sole trader could never have. Basically you have to pay payroll tax in Canberra for any role you do if you’re not in a public service position, it’s a rort on the self employed in Canberra whilst big consulting companies off shore their tax payments.

Capital Retro6:59 pm 09 Feb 23

“It doesn’t take too much sleuthing to match up rental databases, publicly available, with information on ‘is that property currently on the land tax system’,” he said.

How disingenuous can Barr get? The govt. has access to electricity accounts, motor vehicle registered addresses, healthcare services records etc. and that’s where they get their house occupier details from.

Robodebt 2.0 because landlords, business owners and investors can all go stuff themselves but dole bludgers and welfare cheats are good according to the Greens/labour government books.

No they do not. The use of such information has to be agreed to – and people acknowledge and agree to this when supplying such information. You would be surprised at how little access they are allowed to share across directorates.

Capital Retro4:18 pm 10 Feb 23

What is the first letter you get at your new address? From the AEC telling you you have to re-enroll in your new electorate. Who told them?

Of course it happens – what do you think “shared services” means?

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