What’s with the scare story about rates tripling?

Masquara 21 September 2012 45

Does anyone know the facts about “rates tripling” as per the Liberal Party ads?

I can’t afford to pay $130 a WEEK for rates on the average wage!

What is Katie Gallagher thinking? And this will affect tenants surely?


UPDATE 21/09/12 12:30: Andrew Barr’s office have sent in this reply:

The Liberals are using an Abbott-style scare campaign about your rates.

Labor is not tripling rates. The Canberra Liberals are wrong.

ACT Labor has changed the rates system to make it fairer, and cut stamp duty to make housing more affordable.

For 33,700 Canberra households rates have gone down.

For others , the average rate increase is $2.35 a week as wages continue to rise and other taxes are cut.

The Seselja Liberals quote a table from the Quinlan tax review but that table was rejected by Government, and does not form part of the rates policy.

The Liberals are peddling a desperate lie, based on a rejected table to cover the fact they have no plan, except to cut jobs.


UPDATE 21/09/12 14:49: Zed Seselja’s office has sent in these thoughts:

Since budget day, Andrew Barr has been gloating about his ‘progressive’ changes to abolish stamp duty. Since Budget day, he has been saying it would be replaced by rates. Since budget day, he has not been honest about how just how much that is going to cost.

Andrew Barr himself said “Canberrans understand that tax changes like the ones I have announced need to be paid for.” ( Budget Speech June 2012)

The changes Andrew Barr proposes will cost the government well over $300 million a year when finished. That’s $300 million that needs to be replaced by rates. That is easily three times higher than the rates revenue generated now. It is simply impossible to abolish one tax and not increase rates by the same amount, without a drastic change to the budget or a massive job cuts to the ACT public service.

After months taking the credit as ‘the great reformer’ for abolishing stamp duty, It is too late for him to run away from the costs of those promises now.

As far as ‘fairness’ goes – How is it fair to those on a fixed income to increase their rates by thousands every year? How is it fair to those who have just paid stamp duty to pay the same amount again every few years – forever?
And how is it fair to those who simply cannot pay, who will then have their debt deducted from their estate, just like a death tax?

It is not a ‘fairer’ tax, it is not a ‘progressive’ tax – it is a bigger tax, plain and simple.

The Canberra Liberals plan is to give support to those who most need it – first home buyers, without tripling rates for everyone else.

It is a choice – people can vote to abolish stamp duty and have their rates tripled to pay for it, or they can vote for the existing scheme, plus support for first home buyers, and keep their rates low.

One thing is guaranteed, rates will not triple under the Canberra Liberals to pay for Andrew Barr’s promises.


What's Your Opinion?


Please login to post your comments, or connect with
45 Responses to What’s with the scare story about rates tripling?
Filter
Order
milkman milkman 8:55 pm 16 Oct 12

Removing stamp duty increases the ability of a purchaser to buy. As such, more money will be chasing the desirbale properties and they wwill increase in price.

steele_blade steele_blade 8:43 pm 16 Oct 12

whitelaughter said :

arescarti42 said :

Stamp Duty is a horribly inefficient, unfair and ridiculously antiquated tax that acts as a major impediment to labour mobility. Replacing it with increased rates (e.g. higher land taxes) is a brilliant idea that every state should be doing.

Uh-huh.
Explain where I am wrong then:
Currently, people buy the house they can afford: ie cost+stamp duty+conveyancing etc.

There aren’t enough houses in Canberra. So people will have to fork out the same amount: the money that would have gone to stamp duties will instead go to the seller/their lawyers.

Then, after having paid exactly as much money, the proud new owner gets slugged with increased rates…and the unimproved value of the land has gone up, because of the increase in house prices, so they pay even more in rates!

Sure, this is great for anyone leaving Canberra for good, but how does it benefit anyone who actually wants to live here?

Where you are wrong: Your assumption is that sellers are going to put their prices up by tens of thousands of dollars because they all think they can gouge the money that formerly had to go to stamp duty. The housing market doesn’t work that way. A person may buy a more expensive house than they otherwise would have, that’s up to them. Others will buy at the same level and need a smaller mortgage. Still others will be able to buy earlier than they presently can. All good outcomes.

My way of measuring the proposal: If the system were invented from scratch, would any jurisdiction include stamp duty in their revenue stream? No.

whitelaughter whitelaughter 7:15 pm 16 Oct 12

arescarti42 said :

Stamp Duty is a horribly inefficient, unfair and ridiculously antiquated tax that acts as a major impediment to labour mobility. Replacing it with increased rates (e.g. higher land taxes) is a brilliant idea that every state should be doing.

Uh-huh.
Explain where I am wrong then:
Currently, people buy the house they can afford: ie cost+stamp duty+conveyancing etc.

There aren’t enough houses in Canberra. So people will have to fork out the same amount: the money that would have gone to stamp duties will instead go to the seller/their lawyers.

Then, after having paid exactly as much money, the proud new owner gets slugged with increased rates…and the unimproved value of the land has gone up, because of the increase in house prices, so they pay even more in rates!

Sure, this is great for anyone leaving Canberra for good, but how does it benefit anyone who actually wants to live here?

Frustrated Frustrated 11:59 am 07 Oct 12

Very Busy said :

My average annual rates bill has doubled, with an average annual increase of 6.5% since ACT Labor came to office. That is more than double the rate of CPI increases.

Huge increases in 2004 and 2005 of 18% and 21% respectively would be partly to blame. Going by ACT Labor’s track record, I wouldn’t be at all surprised if Labor threw in a couple more “one off” massive increases as they have done in the past.

If you think Rates and other expenses will improve under a Liberal Govt, you are delusional.

I agree Rates have gone up over the last 10 years, but so have many other things like Rego and so on.

Things didn’t suddenly become expensive when the Stanhope Govt came into power, Carnell and her Libs were a shocker also.

pepmeup pepmeup 3:34 pm 25 Sep 12

looking at chart 6 on page 10 of the A fairer, simpler and mre efficient tax system, 5 year reform plan:

http://tinyurl.com/9noaquv

show what will happen with rates, if you auv is above $150,000 your rates go up, if they are above $300,000 (most of canberra) they go up a lot and if they are above $450,000 they go through the roof.

so if you live in an apartment you are fine, its ok Minister Barr does. but if you live in say an average street in an average suburb (rivett average ucv $321,000) you will pay more. forget that you might have just paid stamp duty, you get to pay more to live in your own house you have already paid for.

The table on page 13 of the 2012-13 budget paper no.2 shows government income from general rates moving from $78.77 Million in 2012-13 to $137.65 Million by 2015-16 so you would have to say some rate will have to go up over that time.

and land lords will pass this on to renters, along with the more expencive land tax on properties with higher ucv’s (thats real houses not apartments) and the unit tax will also put the cost of aparments up for land lords which will in tern put up rents. So I dont think you can avoid paying more. But think of all the cool public art we will have in Canberra once the Labor gov gets all our money

sharedawealth sharedawealth 7:20 am 23 Sep 12

From what I understand the proposed tax reform is not about increasing tax – just getting rid of some of the unfair and inefficient taxes like stamp duty and making up for lost revenue by rolling it into a land value based tax – which is much more fair and efficient.

It is good policy. The liberal party is unnecessarily scaring people that this is a tax increase – which it is not.

SnapperJack SnapperJack 7:20 pm 22 Sep 12

Actually it isn’t a scare story. I believe it. Andrew Barr has given us the biggest deficit in ACT history. Our triple A rating will soon be downgraded and the interest bill on borrowings will therefore increase. Corbell has announced a bizarre plan to source 90% of power from wind and solar making electricity unaffordable. Labor has also announced an expensive and superfluous light rail system, a party that couldn’t even construct the GDE properly and which ended up costing triple the estimate.

With the massively irresponsible spending and promises by Labor and The Greens, rates will probably need to increase ten times over at least if they are re-elected.

poppy poppy 5:07 pm 22 Sep 12

Masquara asks if this will effect tenants. Whilst unfortunately landlords can’t just “pass on” costs to tenants, increases in costs results in fewer people willing to build or purchase properties for rental and fewer people willing to consider renting their existing home when their circumstances change or they are away for an extended period. This will lead to a reduced supply of rental properties which can of course result in higher rents.

At the moment for a rental property I own in the ACT, land tax and rates take about $7000 a year out of gross rent of about $30,000 – that is assuming the property has no vacancy period. If rates were to triple then I would lose $11,000 a year in rates and land tax. That is assuming that the land tax did not also increase. I understand under this plan that some properties will have reduced land tax but in my case having a modest house on a block with a fairly high land value, I will get no reduction in land tax, it might even increase. Obviously having more than a third of rental income taken up by government fees and charges is going to have some effect on the willingness of people to invest in rental properties in the ACT.

Unlike most of the rest of Australia, land tax applies to basically everyone with a rental property here. This is as opposed to most other states where a landlord owning one or two modest properties would be exempt from land tax or pay only an insignificant amount. Most landlords in Australia are “Mums and Dads” who only own one rental property and therefore the land tax regime in the ACT is certainly causing many of these “Mums and Dads” to consider investing outside of the ACT.

The situation is complicated by the fact that with our leasehold system, investors purchasing a property in the ACT for the purpose of earning rental income can claim the stamp duty upfront on their income tax in that year. This is a cost worn by the federal government, and has helped to compensate for the very high land taxes in the ACT. In other states, the stamp duty can only be offset against any capital gain when the property is sold. So by removing the stamp duties and greatly increasing rates (whilst not really changing land tax that much), the ACT is looking like a really poor place to invest especially when an investor could easily just buy in Queanbeyan and still be able to easily inspect their property.

milkman milkman 12:18 pm 22 Sep 12

This is a way for the govt to gather more revenue from property. Once people are used to paying a higher amount it will fall off the radar, and the govt can continue to collect higher rates over the years to come.

rosscoact rosscoact 8:40 am 22 Sep 12

gooterz said :

The property developers must love this.

No stamp duty but higher rates = appartments are suddenly worth a lot more.

I’m not sure about that. The price rises have been under the existing stamp duty regime. They seem to be arguing that the extra lease variation charges make up for any (future) drop in stamp duty. Dont forget that this is being phased in over 20 years

gooterz gooterz 12:12 am 22 Sep 12

The property developers must love this.

No stamp duty but higher rates = appartments are suddenly worth a lot more.

harley harley 11:50 pm 21 Sep 12

The Canberra Liberals plan is to give support to those who most need it – first home buyers, without tripling rates for everyone else.

really, Zed? people who can afford to purchase a home are those in most need?

LSWCHP LSWCHP 9:32 pm 21 Sep 12

Skidbladnir said :

As much as I hate the Labor Party, the ACT Liberal Party are a joke of an opposition and are profoundly ineffective as a whole.

They have a few members who seem like they could actually lead a Party to election victory and might otherwise be judged as worthwhile voting material, if they weren’t clearly so dain bramaged as to follow incompetent leaders to their doom.

Also, Page 16 of the relevant Budget Paper shows the effective benefit of different methods of taxation. Payroll Tax has in excess of 30% wastage in admin overhead, Conveyance and Insurance duties are worse. Putting as much of the burden on general rates makes for a more administratively efficient taxation model.
IE: More bang per buck.

(Does the Liberal Party actually bother to read any paperwork that the ACT Public Service gives them, especially if its relevant to the strength of whatever attack campaign they’re planning?)

Skid says the ACT Libs are a joke and ineffective. More damning criticism would be hard to find.

I’m hoping that Zed et al will read this, and realising the error of the ways immediately decide that the only decent thing to do is to go and fall on their swords to make room for someone who can properly clean house around here. Until they obtain swords and commence falling we will all get more of the same old same old from the ACT Labor mob.

Gungahlin Al Gungahlin Al 8:49 pm 21 Sep 12

JessP said :

A huge rate increase this year and doubled over the last few years

I don’t know why. Despite a $25,000 increase in the unimproved value of our block since last year, our rates bill went up just $66.

HiddenDragon HiddenDragon 8:42 pm 21 Sep 12

My hope, in a sense, is that the whole thing is really just an elaborately disguised attempt to raise a bit more revenue overall, and that the full horror of it – whether it’s tripling, quadrupling, or “only” doubling is unlikely to happen as proposed – either because we have a change of government (or come close enough to it to frighten Labor and the Greens), or because it is overtaken by broader national developments regarding taxation and revenue distribution. On the latter point, my fear is that, for the ACT, being a first mover could, in this instance, turn out to be a spectacular example of leading with one’s chin.

Those who value an historical perspective might find this article, written in the lead-up to the 2001 election, interesting:

http://www.crispinhull.com.au/2001/06/06/2001_06_june_leader29jun-rates/#more-7292

It suggests that the views held by then Deputy Opposition Leader Ted Quinlan were somewhat different from the views held by now Taxation Review chair Ted Quinlan. Labor’s 2001 rates proposals were fairly promptly abandoned once they had won that election, which was probably a relief to the Liberals who had, of course, vigorously opposed Labor’s proposals. All of which goes to show that those who stay in public life long enough will eventually adopt more positions than the Kama Sutra – I trust the current crew will be no less fluid in their handling of this vexed issue.

cranky cranky 6:00 pm 21 Sep 12

Sorry, probably not well written.

Instead of the $250K or so per block the Gov require, make it $230K. Bulk profit from the land, servicing covered.

rosscoact rosscoact 5:45 pm 21 Sep 12

cranky said :

Govco would be seen in a far better light if, rather than reducing stamp duty, they made land available at a reduced price in the order of $20k per block, balancing the equation for new home buyers.

It costs say $50k per block to service, let alone the cost of the land. This would mean a massive subsidy to the people who buy blocks of land so that what is now a revenue stream turns into a massive nett cost to all taxpayers.

Hmmm, not sure if you have thought this through.

cranky cranky 5:23 pm 21 Sep 12

Govco would be seen in a far better light if, rather than reducing stamp duty, they made land available at a reduced price in the order of $20k per block, balancing the equation for new home buyers.

Skidbladnir Skidbladnir 5:12 pm 21 Sep 12

As much as I hate the Labor Party, the ACT Liberal Party are a joke of an opposition and are profoundly ineffective as a whole.

They have a few members who seem like they could actually lead a Party to election victory and might otherwise be judged as worthwhile voting material, if they weren’t clearly so dain bramaged as to follow incompetent leaders to their doom.

Also, Page 16 of the relevant Budget Paper shows the effective benefit of different methods of taxation. Payroll Tax has in excess of 30% wastage in admin overhead, Conveyance and Insurance duties are worse. Putting as much of the burden on general rates makes for a more administratively efficient taxation model.
IE: More bang per buck.

(Does the Liberal Party actually bother to read any paperwork that the ACT Public Service gives them, especially if its relevant to the strength of whatever attack campaign they’re planning?)

housebound housebound 5:06 pm 21 Sep 12

Barr would have had some credibility on this issue if he had gone for a phased approach, but no, he had to go for the double hit on those of us who have already paid stamp duty. Stamp duty might be ‘inefficient’, but you only pay it if you move – far batter than the rate increases we’ve all had.

Looking back through old rates notices, the amount we paid back in 2002 (just after Labor took over) was less than the basic flat fee we now pay before taking ULP into account. The increase from then to now is a bit over 2.5 times, and that’s with stamp duty in place.

CBR Tweets

Sign up to our newsletter

 Top
Region Group Pty Ltd

Search across the site