Page 74 - Week 01 - Tuesday, 12 February 2019
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the different components of a rates bill are arrived at, and how the methodology takes into account relativities between types of blocks.
We are currently considering how these issues can be best addressed within the overall framework of the current rating system. This will also inform preparatory work that will get underway this year to develop the next five-year phase of tax reform. In developing the next reform program, we will commission a detailed analysis of the impacts of the reform on our economy, the community’s revenue base and Canberrans across the income distribution.
The analysis will be conducted throughout the coming year and will provide input to the government to inform the 2020 territory budget. The aim of the analysis will be to ensure that there is an informed discussion about tax reform and that the settings for the next phase maintain the economic objectives of this important reform whilst ensuring they achieve the community’s social needs and priorities.
I commend the government response to the Assembly, acknowledging that there is more to do on tax reform, both through this work and through further deliberations in this Assembly.
MS LE COUTEUR (Murrumbidgee) (3.34): I will start with some general comments about the tax system and then specifically talk about the government’s response. The ACT is in the process of moving away from stamp duty and replacing the lost income with rates and land tax, and this changes our taxation to be annual rather than based on a specific transaction—that is, purchasing real estate. Instead of this, all Canberra residents pay rates annually, either directly or via the rent that they pay to their landlord, who pays rates and land tax.
Paying annually is clearly much more aligned with the ACT government budget and service provision. But the change also changed taxation to be based only on land value rather than on market value, and of course in general the wealth of taxpayers is more closely related to the market value of their property than just the land value.
As I have said in previous speeches, because the ACT is the first jurisdiction in Australia to deliver this tax reform, the ACT is the first to observe some of the practical issues that arise, such as pensioners in modest older homes paying over 14 per cent of their income on rates, while for median income households median rates are less than 2 per cent of their income; and difficulties with setting rates for units because rates are currently based on land value only, and apartments many floors off the ground simply do not have a simple land value. Entry-level houses for first homebuyers are paying higher rates than a McMansion down the street that is worth half a million dollars more in some instances, simply because of the size of the block. The same thing goes for older people in houses that are much smaller and more modest than their neighbours’.
All of these are issues with the fairness of the tax system. This is a real issue. It is important that we do not let the fact that Canberra has a high average income blind us to the fact that some people in Canberra are struggling financially.
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