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Still expecting a discount for paying your rates early? Think again

By Ian Bushnell 1 October 2018 11

aerial shot of houses

A Budget measure that many may have missed this year is now starting to impact those ratepayers fortunate enough to pay their rates early.

For many years these ratepayers have enjoyed a discount for early payment but this year’s Budget abolished it as part of a phase-out initiated in 2016.

Last year, the discount was reduced from 3 per cent to 1 per cent, and the 2018-19 Budget Papers refer to its scrapping as a revenue initiative under the banner Fairer Revenue.

It is expected to bring in $6.4 million over the forward estimates, with $1.4 million in 2018-19, $1.5 million in 2019-20, $1.7 million in 2020-21, and $1.8 million in $2021-22.

A spokesperson for Chief Minister Andrew Barr said the Government had been phasing out the discount since the 2016-17 Budget as an equity measure.

About a quarter of ACT households received the discount, and they were almost exclusively wealthy households.

“The ACT Government is committed to supporting Canberra households most in need of assistance. For example, this year we expanded the General Rates Aged Deferral Scheme by removing the income and unimproved land value thresholds so more senior Canberrans can defer their annual rates to help with their cost of living,” the spokesperson said.

“The ACT remains a relatively low taxing jurisdiction and the ACT Government continues to seek opportunities to make our revenue system fairer as we proceed with tax reform in the years ahead.”

The spokesperson said the phasing out of the discount was outlined in the 2016-17, 2017-18 and 2018-19 Budget Papers, reported in the media each year and discussed in Budget Estimates.

Rates notices in 2016-17 and 2017-18 indicated the reduction in the discount.

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Still expecting a discount for paying your rates early? Think again
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jsmith 11:47 pm 07 Oct 18

I’ve only been in Canberra a few years, but I have been shocked at the rates path the government has taken. It seems pretty clear to me that it hits the poorer households in the outer suburbs without giving them the benefit of their increasing fees.

Having lived in other Australian States and overseas where house and land value, rather than the ACT land size only model never seemed an issue for more fairly calculating rates elsewhere.

bj_ACT 2:39 pm 03 Oct 18

Hi Chewy, I know we come from two different viewpoints on the Rates changes and we will never agree on the right approach. I do understand your viewpoint and the logic you make, but I still think the model being implemented is flawed and needs some tweaking to capture more than just per metre land value and a fixed base.

I will tell the story from a discussion I had today with some colleagues about their house purchases from 2017 and how the Stamp Duty switch to Annual Rates that the ACT Government is implementing and how it would have affected them.

The first person, a service support member on $55k a year bought a Kambah detached House on 1069sqm for $465,000 with annual Rates at $2,454 per year. The second person, a manager on around $130k a year bought a detached House on 588sqm in a more expensive suburb for $845,000 but his annual rates are less at just $2118 per year.

Under the old Stamp Duty on House and Land Sale model, the expensive house would pay far more in Stamp Duty than the cheap house. Under the ACT Governments fully implemented new model, the person who bought the cheap house on a large block of land will be paying far more in Rates and Charges that the expensive purchase (and it the difference will get worse each year until transition).

Kambah doesn’t get the same level of services and facilities as the better Suburb. Kambah has had Primary 3 schools close and has poor public transport and poor public amenities. The other Suburb has a great Government school and excellent transport and amenities. Kambah had mortgage stress at 71.4% according to Canberra Times 22 Sept, almost double the next worst area in Canberra.

    chewy14 5:46 pm 03 Oct 18

    You’re comparing apples and oranges.
    The Kambah person has most of their wealth in an appreciating asset (the land) with significant opportunity for growth.
    The other person has most of their wealth in a depreciating asset (their house) with less chance for growth.

    The person in the expensive suburb may get better services but has significantly less land from which to benefit from.
    The government would also get significantly more money per square meter from that expensive area and service delivery would be less per dwelling due to the higher densities and economies of scale.

    What you seem to be asking for is a rating scheme on the improved value of land as the Greens have lobbied for.
    This would be more difficult to manage and has the massive negative outcome of incentivising people to not improve their land or properties, which is the exact opposite of what we want.

bj_ACT 8:26 pm 01 Oct 18

If Andrew Barr was serious about financially supporting poorer households who need more assistance, he shouldn’t be hiking up annual rates on outer suburban homes, hitting house blocks of lower sale value and taking ever increasing money from areas with less access to government facilities and services.

ACT Government should instead try to reduce the annual Rates increases to protect the poor, adjust rates for areas with poor government services, focus stamp duty on expensive house sales and cut his government expenditure on frivolous activities.

It’s absolute spin to try and claim these changes are to address financially struggling canberra households.

    chewy14 7:15 am 02 Oct 18

    And it’s absolute spin to suggest the change in rates won’t help struggling households into the future.

    Firstly, most “struggling” households don’t own property, so aren’t directly affected by the change.

    And no, landlords can’t simply raise rents to make them pay it. If rents could be higher, then they already would be, landlords aren’t a charity, they charge the maximum the market will bear.

    Secondly, the changes are over twenty years which lessens the impact on lower income property owning households. On average people move every seven years so almost everyone will benefit from the lower stamp duty rates when this occurs.

    Thirdly, our rating scheme is progressive, meaning expensive inner city dwellings pay proportionally more.

    And finally, all of these together add up to incentives to utilise our land far more efficiently than it has been in the past, it will be much more difficult to sit on expensive land in the future which means that over the long term, property prices will be lower due to higher holding costs and higher density dwellings being built on that expensive land.

    Which is a win for all struggling households long term.

    The people it won’t benefit is the tiny minority of people who own their own house, have no plans to move ever and don’t want to pay for the necessary revenue our territory needs to run.

    bj_ACT 4:38 pm 02 Oct 18

    I think we will continue to disagree on the new rates model.

    Your theoretical positives on the new rates model isn’t being borne out by reality.

    There are plenty of struggling home owners with mortgages. So I don’t know why you think struggling homeowners are rare.

    Poorer households don’t move every seven years on average. It’s the upwardly mobile who tend to buy a new house more often than average.

    The progressive aspects of the rates changes have proved way too gradual in their percentage increase, add to that the ‘fixed base rates charge’ increasing at a much greater rate.

    Advocacy groups have raised the inequality of the new rates model. I fully support them in their concern.

    The shift from the previous model with Stamp Duty hitting the most expensive House Sales, to instead…..

    Charging people based on a fixed annual rates amount that is the same if your house is worth $350 thousand or 3.5 million and topping that charge up with the ‘per square metre’ value of their land, is clearly hitting the poor proportionally harder than the rich.

    Even a senior economist I know who supported the change from Stamp Duty, has begun to realise the flaw in the model that the ACT has applied.

    chewy14 6:34 pm 02 Oct 18

    They aren’t theoretical positives, they are the obvious outcomes that are already starting to occur.

    “There are plenty of struggling home owners with mortgages. So I don’t know why you think struggling homeowners are rare”

    Because the data shows it to be the case during this period of abnormally low interest rates going on a decade now?

    https://www.canberratimes.com.au/national/act/how-much-mortgage-stress-is-in-your-postcode-20180911-p5030e.html

    Canberra has very low levels of mortgage stress and some of those stressed actually includes relatively well off people who have overextended themselves.

    What are you basing your statement on poorer houses not moving on? People move for all sorts of reasons not related to upsizing, including to move closer to new jobs, coincidentally another of the key benefits to the rating change.

    Charging people a fixed charge isn’t unfair, it actually recognises the fact that a household receives a number of “fixed” services that apply to all. It would be more unfair not to have such a fixed charge.

    “Even a senior economist I know who supported the change from Stamp Duty, has begun to realise the flaw in the model that the ACT has applied.”

    Yes, you might be able to point to a single economist with an axe to grind. I can point to the vast majority of economists who would support the ACT’s move to a broad based land tax as a perfect example of real taxation reform.

Hoppingmad 1:37 pm 01 Oct 18

When I opened my annual rates notice just a week or so ago, I was surprised to read on the front top right where it details the amount due that I had apparently until 18 October (or some date pretty soon), to pay the full amount for the year.

Not pretending that when I turned the page over it didn’t have the quarterly amounts, however, it is a misleading statement and I wonder how many people might have got a bit of a shock at first. It’s especially silly if there is no discount for payment in full.

    g210 10:10 am 03 Oct 18

    “It’s especially silly if there is no discount for payment in full.”
    That would be Barrs “Fairer Revenue” initiative, spun as “an equity measure”.

OpenYourMind 1:21 pm 01 Oct 18

That white elephant ain’t gonna pay for itself. Remember the Lib’s scare campaign about Labor tripling our rates? Turns out they were just telling it how it is.

    JC 8:27 pm 06 Oct 18

    So you rates have tripled hey?

    No? Didn’t think so.

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