21 September 2012

What's with the scare story about rates tripling?

| Masquara
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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.

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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_blade8:43 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.

whitelaughter7:15 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?

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.

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

sharedawealth7:20 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.

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.

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.

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.

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

The property developers must love this.

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

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?

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 Al8:49 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.

HiddenDragon8:42 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.

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.

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.

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.

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?)

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.

Tetranitrate said :

The position the libs have taken on this is so juvenile and short sighted that despite having formed the opinion that the present government must go, I’m seriously thinking of putting Labor/Greens ahead of Libs after 3rd parties.
Why can’t the libs come out swinging on the broken planning and liquor licence systems?

Out of curiosity what is wrong with the current liquor licence system?

Tetranitrate said :

The position the libs have taken on this is so juvenile and short sighted that despite having formed the opinion that the present government must go, I’m seriously thinking of putting Labor/Greens ahead of Libs after 3rd parties.

Agreed. I don’t normally support Labor, but I am absoloutely disgusted at the way the Libs have approached this issue. Short term sensationalist scare campaign. Seriously, grow up and treat the electorate with at least a little bit of intelligence. You can remove me from your ‘safe lib vote’ column and put me firmly in the ‘undecided swinger’ (of the voter kind…not any other kind).

Tetranitrate4:09 pm 21 Sep 12

The position the libs have taken on this is so juvenile and short sighted that despite having formed the opinion that the present government must go, I’m seriously thinking of putting Labor/Greens ahead of Libs after 3rd parties.
Why can’t the libs come out swinging on the broken planning and liquor licence systems?

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.

+1
A huge rate increase this year and doubled over the last few years – and with all the election promises and no stamp duty where are the dollars coming from?

Gungahlin Al said :

Indeed. It prevents people downsizing as they age. They stick instead with trying to maintain oversized yards while families are forced further out where there are no yards for their children. It inhibits people relocating to live closer to work. It inhibits property investments and better rental availability.

Under this plan people with have to downsize because they wont be able to afford to pay there rates and if they choose to defer it they will leave a debt for after their estates.

This from the government that promised us Gungalin Drive extension as a via transport option – and delivered a 2 lane road and 5 years of construction pain?

What about the data scandal?? What does that say about the ACT Government?

For the last 11 years I had faith in ACT Labor to do the right thing, but no more.

Gungahlin Al3:25 pm 21 Sep 12

This Liberal spin will be hung in a frame alongside that other Liberal masterpiece: “Whyalla will be wiped off the map.”

davo101 said :

Table 45 on p.148 of the ACT taxation review. Although these figures are for a transition over 10 years and I think the current intention is to do it over 20 years.

This model was rejected.

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.

Indeed. It prevents people downsizing as they age. They stick instead with trying to maintain oversized yards while families are forced further out where there are no yards for their children. It inhibits people relocating to live closer to work. It inhibits property investments and better rental availability.

If some people are caught with limited means but on a property with unrealised high value, there could be a request for a means assessment. We (Maroochy Shire Council) did similar to this on the Sunshine Coast when waterfront property took off in places like Peregian Beach. People who bought in when streets were dirt found themselves on $1M land with no ability to pay the high rates. The solutions to this are already out there in wide use around Australian local governments. This is as I explained to the Inner South Combined Community Council meet the candidates forum last week.

Meanwhile, the Liberals are again hanging their hats on promises like stamp duty waivers for new home buyers – which time and again has proven to just drive up home prices by the same amount.

Mysteryman said :

The PDF that davo101 posted shows an average of $1056 to $2932 in 10 years.

So over 10 years Zed is probably right with his triple rates call.

If it was over 20 years, we maybe could handle it and get rid of stamp duty. That would be something Labor could easily sell. So which is it, 10 years or 20 years?

chewy14 said :

I don’t know why Labor are beating around the bush.

This policy is a great one, they should own it and be proud.

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.

+1.

+1 gazillion. Plenty of people whinge about politics being short-termism (see BCA), but few have the courage to put it action. If sub-national governments are going to break free from the disaster of property boom & busts, this is the sort of politcy that is going to do it.

Unfortunately you give the typical voter, swayed easily by three word sloganeering too much credit.

“Stamp Duty is a horribly inefficient, unfair and ridiculously antiquated tax that acts as a major impediment to labour mobility.”

vs

“TRIPPLE YOUR TAXES”
[Spoken in a menacing voice like narrator just ate a bar of Solvol]

Unfortunately you give the typical voter, swayed easily by three word sloganeering too much credit.

“Stamp Duty is a horribly inefficient, unfair and ridiculously antiquated tax that acts as a major impediment to labour mobility.”

vs

“TRIPPLE YOUR TAXES”
[Spoken in a menacing voice like you just ate a bar of Solvol]

I don’t know why Labor are beating around the bush.

This policy is a great one, they should own it and be proud.

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.

+1.

Kramer said :

Masquara – another stab at Labor? Don’t you need to back announce Liberal Party propaganda with “written and authorised by ….”???
Anyone with half a brain could identitfy the pathetic fear campaign attempt in this ad a mile away.

If Masquara had another brain, it’d be lonely.

Kramer said :

Masquara – another stab at Labor? Don’t you need to back announce Liberal Party propaganda with “written and authorised by ….”???
Anyone with half a brain could identitfy the pathetic fear campaign attempt in this ad a mile away.

It sounds like you have half a brain. Care to explain the table on p. 148 of the link posted in the first response?

Masquara – another stab at Labor? Don’t you need to back announce Liberal Party propaganda with “written and authorised by ….”???
Anyone with half a brain could identitfy the pathetic fear campaign attempt in this ad a mile away.

Well, I’m getting screwed over. Firstly, my current house falls close to the Median ACT house price value .. but according to table 45 in the ACT Taxation review, I’m well in the top quintile for rates.

I have just purchased a new house, and handed the government quite a large pile of stamp duty. The AUV made up like 60% of the purchase price, and rates are even higher. According to the tax review, within 10 years I WILL be paying 3.5 times the current rates. Even adjusted for 3% inflation yearly it’s still 2.5 times the current rates.

The end result: Once the transition is complete, every 7 years they will extract from me extra rates above the current level equivalent to the stamp duty I have just paid. (I don’t plan to move every 7 years.)

Within a decade I will have paid one year’s worth of wages in stamp duty + rates. Not happy.

Doc Dogg said :

We could always just get the ACT Government (of whatever flavour) to spend less money on things we don’t need so that they don’t require as much money from the rates payers.

Don’t laugh, it could happen…

Yeh, like GDE version 1.

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.

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.

We could always just get the ACT Government (of whatever flavour) to spend less money on things we don’t need so that they don’t require as much money from the rates payers.

Don’t laugh, it could happen…

The PDF that davo101 posted shows an average of $1056 to $2932 in 10 years.

I keep thinking about this article each time I hear that “triple your rates” claim.

And wondering where the land to develop (and people to populate it) is going to come from if the Libs expect to be able to rely on stamp duty ad infinitum going forward.

Or I imagine an Abbott Govt federally, subsequent public service cuts, the resulting population decline for Canberra, and the resulting impact on the local housing market – and what does that do to ongoing stamp duty revenues?

Tripling over twenty years is the same as a yearly increase of 5.75% compounded annually. Over ten years it is more like 11.5%, which is still only slightly more than landlords can legally increase a tenant’s rent each year.

So, for a minority rates will decrease, everyone else will be at least $122 a year out of pocket, probably increasing on an annual basis as more taxes are abolished. I believe the argument by the Liberals is that everyone in Canberra will pay for the removal of taxes that are only paid by a small part of the community or on a rare occasion when the buy or sell something.

I think the government are trying to hide the full cost to the public and how much we will need to pay for it, but I also think the liberals are exaggerating with the tripling of rates. But then this is an election and you will get that from all parties as that’s what people pay attention to.

So we’ve heard the labor rebuttal. Any clarification from the liberals on what they were referring to?

Then we can take the labor response and liberal clarification, combine them together, remove the trash talking from both sides and get something closer to the truth.

Table 45 on p.148 of the ACT taxation review. Although these figures are for a transition over 10 years and I think the current intention is to do it over 20 years.

Now with a response from Andrew Barr’s office.

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