26 March 2018

The ACT Government mimics the banks by gouging unit owners

| Paul Costigan
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Photo: Paul Costigan.

It is now part of our daily lives that people bear the brunt of increased charges brought on by large corporations inventing more ways to gouge consumers.

Whether it is the big banks, big electricity, big oil or big telcos – they all seem to find new ways to increase charges and to invent new fees – usually with little improvements to the services they provide and accompanied by spin about being ‘fair’ (or something similar).

The reality has been that they do what they do with little regard to the crippling effects these increases are having on so many people.

Not too long ago people looked to their elected governments to sort out these issues. Things have changed. Now the perception is that governments, once elected, quickly become just another big corporation that no longer has the needs of the electorate as its prime focus.

The current ACT Government definitely falls into this category. More and more it seems to be mimicking the big banks in inventing new ways to reach into peoples’ pockets and extract more of their hard earned monies.

A case of how Big Government can be unfair is the way the ACT Government went about changing the formula by which it charges rates for those in strata titled units and townhouses.

These changes while being sold as being ‘fair’ and as part of a greater reform to raising revenue through rates, are a clear signal that this government while labeled as being Labor/Green, has clearly become just another neo-liberal styled corporation that invents ways to gouge the ACT voters.

To the majority of people in the ACT, these changes seemed complicated and the marketing spin ensured that the local media pushed the message that the government was adjusting things to make it all so much fairer (that word again). They trotted out an example of comparing one unit in Civic with a house in an outer suburb.

As with any such corporate marketing exercises, there would be many more that could be used to counter this example – but there’s silence around such facts.

Affected residents have gathered the hard evidence of who is paying what. It will surprise no-one who has had to deal with this government that the government’s claim that 91% of rates for strata residences are calculated at the lower marginal rate category is not true. The evidence instead points to a much higher number of strata residences being charged at the highest marginal rate category.

The evidence-based conclusion is that the former methodology based on the unimproved value of land was fair and equitable, whereas the new system clearly is not.

These unfair changes were introduced while other homeowners had to adjust their own lives to large increases to rates. So I doubt whether non-strata owners were paying too much attention to the plight of strata unit holders suffering this extraordinary shift in the way this government was hitting them for increased rates.

I doubt whether this Labor/Green mix of politicians ensured that these proposals were first subject to in-depth research to see if this would bring about further hardship to people such as lone parents, pensioners who had downsized out of necessity and so many on very low incomes who struggle to keep things together – mainly because of all those other ‘big’ corporations already mentioned.

Instead, we are seeing the effect of the cold hand of the bean counters within the Chief Minister’s Budget and Economic Policy unit. It is about following orders to raise dollars – gouging another sector of the electorate – despite any possible long-lost social agendas that used to underpin a Labor or Green political party in government.

Documentation in circulation illustrates how people on low incomes, who were very lucky to get into a low-cost unit or townhouse in recent years, now face enormous burdens to make ends meet thanks to these so-called ‘fair’ changes to their rates.

Yes, there are probably well off people in strata units who will complain about any increases. But there are large numbers of low-income people across many sectors who are finding these new changes an extraordinary threat to their mental health and their everyday lives as they struggle with this and so many other challenges been thrown their way by so many arms of governments.

All these new charges come at a time when we have seen this same government throw money away through deals (think Dickson land swap) and through other dubious initiatives. Fair? I think not! (Maybe we need to redefine ‘fair’ when the word is used by government spin-doctors)

As with the current Federal Government and other ‘big’ corporations, one wonders if there are any more sectors of the voting population that the current Labor/Greens ACT Government has yet to pick on?

Whatever happened to good old-fashioned ‘Labor Values’, transparency, common fairness and decency? Not something we see much of these days.

IT IS TIME that this ACT government was honest with those in strata units.

IT IS TIME for a bit of compassion.

IT IS TIME for such decisions based on hard evidence.

IT IS TIME that raising funds (rates) was not an end in itself ruled by the Chief Minister’s bean counters in Economic Development but rather that such decisions need to be fully considered in the context of what sort of city we are to have in the future and how people are to be treated with respect and equity.

It is really not that hard to do.

IT IS TIME to reverse this decision on how rates are calculated for strata titled units and townhouses.

What are your thoughts on this issue? Share them with us by commenting below.

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Gotta pay for that billion dollar lightfail somehow.

Because of the rates hike, I’ve had to give up my private health insurance.

The Gov just don’t care

Just catching up with the gouging that everyone else has been having. Double-dipping people who paid stamp duty and now have to pay it again and again and again.

HiddenDragon12:35 pm 29 Mar 18

The changed method for calculating annual rates for strata/multi-unit dwellings was actually announced before the October 2016 ACT election, so anyone with the time and interest to follow such things would have known about it when deciding their vote – details here:

ACT Budget 2016-17, Budget Paper 3 – Budget Outlook – p.258

“In Stage Two of the tax reform program, it is appropriate that the charging structure for general rates becomes more equitable between different housing types. From 1 July 2017, the Government will change the general rates calculation for multi-unit dwellings to base it on the total AUV of the land rather than the individual AUV of the unit (consistent with changes to Land Tax). This change, to be phased in over two years, will establish greater equity in general rates paid between houses and units. This will make the increase in general rates for units higher than houses in 2017-18 and 2018-19 as the transition takes effect.”

That, of course, is cold comfort for people who are now facing very difficult choices and circumstances (with hundreds of millions per year in conveyancing duties yet to be replaced by annual rates) – a Labor government (as opposed to a Labor-branded government) would recognise this and reflect upon the wisdom and decency of pressing ahead relentlessy with a currently fashionable economic theory, regardless of the impacts on many of the people it represents.

Ashley Latimer,
brilliant idea.

Except for the fact that your “step 5” is actually “lose $300 million dollars” in buying back the Fluffy blocks and clearing them of contamination.

If the government was trying to make money out of it, they sure are going about it in a funny way.

Either pay up or move out. Canberra isn’t for everyone.
Or Perhaps after 20 years its time for a change in governance.

Firstly, is there a link to this “evidence”?

Secondly, if the author is so against higher rates, why does he support projects such as the light rail which has a far higher impact on poorer ratepayers. Poorer ratepayers who will never benefit from the light rail that they’ve been conscripted to pay for. Payments that have resulted in massive private financial gains to well off property owners in the Inner North where the author is so keenly interested in. Anything on that?

bringontheevidence4:34 pm 28 Mar 18

Are you going to provide a source for your claims?

Anyway, the vast bulk of genuinely disadvantaged Canberrans rent rather than own their property, yet you are actively opposing the construction of new dwellings in the Inner North that will increase the available stock of rental dwellings (pushing rents down). You have also never mentioned your position on the additional land tax levied on owners of rental properties, most of which gets passed through to renters.

Peter Kelley9:17 am 28 Mar 18

I was left with a number of questions after reading this article: What is the new formula? Why is it unfair? How is it financially different to the current system? Who is affected? In order to agree with the whinge I need to know the details. I live in a strata titled town house so I really want to know.

My understanding is that under the old system, the land value of a strata block was divided up between the individual unit holders. Then each would be levied rates based on the value of their share of the land, plus the fixed charges. The change was to assess the value component on the entire block and allocate that amount between the unit holders.

For example land worth $3m with 20 units on it would have previously seen each unit holder levied rates based on them having a piece of land worth $150,000. That would have come to $444 plus the fixed charges of $765 for a total of $1,209 per unit. Under the change, rates are calculated on the entire value of $3m, attracting a charge of $17,098 or $855 per unit, plus $765 fixed charges for a total of $1,620.

The increase arises because of the progressive taxation of land. As the value increases, the tax levied increases as a percentage of the value, just like marginal tax rates for wages.

Another way of contrasting is that if someone owned a stand alone piece of land worth $150,000 they would pay $1,209 while someone in the above unit complex pays $1,620 even though their share of the land they own is worth exactly the same amount.

bringontheevidence9:57 pm 28 Mar 18

The old system was pretty unfair for detached home owners. I can even provide a real example from the authors own beloved Dickson.

Compare 15 Randall St (an amalgamation of two blocks) with its direct neighbours 11 Randall St and 6 Stockdale. The blocks are in the same zone, RZ3 for medium density residential, so have effectively the same UAVs. 15 Randall is a double block with a UAV of 1.2 million, 11 Randall and 6 Stockdale are single blocks with UAVs of just over 600k each.
15 Randall has a small apartment block with about ten apartments, while the other blocks only have single dwellings.

Under the old system, 15 Randall UAV would be divided into ten parts (for each unit), each with an effective UAV of 120k. A UAV of 120k is in the lowest category, so each unit owner would pay UAV rates of $350ish (adding up to $3500 for the whole block). Meanwhile the owners of 11 Randall and 6 Stockdale get a combined UAV rates bill of $6000-$7000 because their properties (at UAVs above $600k) are in the top category.

Under the new system 15 Randall would be assed as a whole first, it’s UAV is high enough that it falls into top category (so $6000-$7000 total UAV charge) that would then be split amongst the unit owners.

@bringontheevidence, I guess the question of fairness comes down to whether a person believes Rates should be levied on the unimproved or improved value of a property. The ACT’s Rates system has been based on unimproved values in the past, and under that regime, strata title property owners are now paying more for their land than detached home owners.

If Barr thinks that Rates should be levied on improved values, as he seems to have implied in some of his statements about the fairness of this change, then rather than changing the old system to jack up revenue from strata property owners, he should change the Rates system so that it is based on the total value of each individual property. Under such a change I’d expect to see owners of larger blocks in the outer suburbs with relatively modest houses on them see a reduction in their Rates, along with the owners of modest strata titles, while owners of mansions and million dollar apartments would end up paying more.

Either way I look at it, this has been poor policy and has really been another revenue grab from a tax hungry government.

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