Page 2828 - Week 08 - Tuesday, 13 August 2019
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expedite it, or we are going to keep on going at the same rate but it is just going to hike the amount that it charges, then one way or another you have a situation where the government is desperately selling the assets of the territory to prop up its financial mismanagement.
In 2007-08 there was an interest expense of $60 million. That had tripled to $188 million in 2017-18 and nearly quadrupled to $235 million in 2019-20. To put that into context, paying the interest bill in 2019-20 consumes over 11 per cent of the territory’s total taxation. Eleven per cent of the territory’s total taxation will be the total interest bill. For every $9 that the ACT government gets in taxes, one dollar will be going to fund the interest bill.
With regard to revenue, the commonwealth will deliver a 67 per cent increase in funding to the territory over 10 years. This is above population and inflation growth combined. A 67 per cent increase!
The heart of the tax reform was to abolish stamp duty. That was the major efficiency that the government promised. Revenue from conveyancing will increase by 18 per cent, and the overall effect is a 119 per cent increase in revenue from rates and stamp duty combined. The increase in rates does not include all the fixed levies that Canberrans get with their rates bill. It also does not include levies such as utility bills.
As I have already mentioned, land tax adds a further burden, particularly with regard to commercial rates. In times gone by, prior to the reform, there was a land tax component to commercial rates as well as general rates. The government combined the two and said that was a major efficiency because you only get one bill now. What it did not take into account was that you only paid land tax when your commercial premises were tenanted. Now you pay the combined rates and land tax regardless of whether your commercial property is tenanted.
As anyone would know, there is no shortage of commercial units in Canberra that are untenanted at the moment, yet the owners of those continue to have to pay the rates, which include the embedded land tax that, prior to 2012, they would not have had to pay. Of course, if your commercial rates go up by $10,000, that not only affects your bottom line for that year but also probably wipes at least $100,000 off the value of that property, because the yield has gone down by $10,000. That is on a 10 to one. If we are looking at a 15 to one, you are looking at wiping $150,000 off the value of that property. You are getting hit with your bottom line and then you are also being hit with your equity. It all adds up. That is why so many people are choosing to send their investments over the border into New South Wales.
When you look at the total increases in tax since the reforms began, in 2011-12, there was $1.6 billion from the commonwealth. In 2021-22 it will be $2.6 billion, an increase of 67 per cent. Rates will go from $209 million to $698 million, an increase of 234 per cent, more than tripling. Stamp duty will go from $239 million to $281 million; it is the abolished tax that goes up 18 per cent in 10 years. Levies on rates will go from $28 million to $99 million in that same 10-year period. Land tax will go from $115 million to $164 million. Land sales will go from $261 million to $589 million. Payroll tax doubles from $316 to $668. Total revenue from the
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