Wednesday, June 6, 2012
While the Federal government has shelved the Henry tax review’s reform plans, the ACT government has seized on them in a bold set of reforms that shifts its tax burden to property rates.
A minority Labor government supported by the Greens, the ACT government commissioned its own tax review, headed by former ACT Treasurer Ted Quinlan, which came out with proposals broadly similar to those of the Henry report.
Its tax reforms are the first of their kind in Australia, shifting the weight of taxes from transactions to land — in this case, using rates rather than land tax.
They also introduce new forms of Labor’s Robin Hood reforms — hiking taxes on the well-off and cutting them on the hard-up and middling.
Under the reforms set out yesterday by the territory’s Treasurer, Andrew Barr:
* Stamp duties on conveyancing (transfer of property) will be phased out over 20 years, starting today.
* All taxes on insurance will be phased out within five years, starting from July 1.
* The threshold for firms to pay payroll tax will be lifted to $1.75 million, almost three times Victoria’s level.
* Land tax on commercial properties will be abolished.
* Land tax rates will be lowered for 75 per cent of homes, but raised on properties in the top 10 to 15 per cent of the market.
* To pay for all this, rates will be hiked for households and businesses alike, and made more progressive, with rates rising steeply on properties with a high land value.
Mr Barr said the reforms are fairer, simpler and more efficient. ‘‘Tax bases around Australia – including in the ACT – are unsustainable’’, he said.
‘‘The cost of some essential services, notably health care, is rising faster than the rate of economic growth, and the GST base is eroding. Land sales are a finite resource. Further, our taxes are inequitable, volatile and inefficient.’’
The reforms will reduce stamp duty on the sale of a typical $500,000 home by $2450 overnight and by $7000 over the next four years. (Canberra’s median prices are similar to Melbourne’s, but you get more house for the same price).
The new rates system will combine a flat charge of $555 for all households with a new system of four tax brackets ranging from 0.22 per cent to .41 per cent. Rates on a property with a land value of $ 1 million will jump more than 50 per cent.