news, act-politics

Chief Minister Andrew Barr introduced a bill that will help send Treasury's land tax revenue up an estimated 45 per cent over the five years to 2020-21 on Thursday. The bill would extend land tax to as many as 2500 vacant rental properties in Canberra and add a .75 per cent surcharge on the tax charged to at least 189 ACT properties owned by foreign investors. The proposals follow Mr Barr raising the fixed land tax rate by $100 and changing the way land tax was calculated on units, in the same way that has controversially raised rates for many unit owners in 2016-17. Taken together, the changes introduced in the bill on Thursday, in addition to the changes made in the 2016-17 budget, would increase the government's total land tax revenue by some 45 per cent from 2016-17 to 2020-21. That compares to an estimated 38 per cent rise in general rates revenue - both residential and commercial rates - over the same period, from $451 million in 2016-17 to $627 million in 2020-21. The 2017-18 budget review released earlier this year shows land tax rising from just $106 million in 2016-17 to $154 million in 2020-21, an average of about nine per cent a year for five years. The changes to land tax calculations and the extra $100 on the fixed charge sent Treasury's land tax take up 18 per cent from $106 million in 2016-17 to $130 million this fiscal. But the proposals introduced in the Legislative Assembly on Thursday would increase that by at least another $10 million over four years, about $6 million for the vacant rental tax and about $4 million for the foreign investors' surcharge. Those measures would increase the territory's total land tax revenue from $130 this year up about seven per cent to $141 million this year, with further rises of about four per cent a year for two years, to $147 million in 2018-19 and $154 million in 2019-20. While the changes were first announced in the 2017-18 budget last June, they would not take effect until July 1 this year, if passed, and would not affect owner-occupiers in Canberra, who currently do not pay land tax. Land tax is currently only paid on residential rental properties in the ACT, or residential land owned by a corporation or held in a trust. It is calculated by adding the fixed annual charge of $1145 to the average unimproved value (AUV) of the land multiplied by a marginal based on the total AUV of the land. The rising land tax revenue forms part of the government's wider tax reform agenda, as Mr Barr's government slowly abolishes stamp duty over 20 years, in favour of increasing and widening the land tax and rates base. Mr Barr's spokesman said the government believed there were at least 2500 vacant rental properties in Canberra the tax would soon be applied to, based on measuring those properties with unusually low power and water consumption over a 12 month period. The government has estimated the number of properties owned by foreign investors, or offshore companies or trusts, at at least 189 in the ACT, based on the Foreign Investment Review Board's 2015-16 annual report. Mr Barr told the Assembly the foreign investors surcharge would not be applied to Canberrans who left their primary place of residence vacant while travelling overseas or to overseas citizens living permanently in their own home in the ACT. An earlier version of this story said a 7 per cent surcharge would be added to the tax charged to ACT properties owned by foreign investors. The correct figure is .75 per cent.

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