Former Treasurer Criticizes Unfair Changes to Territory's Unit Rates

Former ACT Treasurer Ted Quinlan criticizes the unfair changes to the territory's unit rates and calls for more finesse in the process. The changes were not recommended in his review of the taxation system.

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SE News
HD They've stuffed it': former treasurer says territory's unit rates changes unfair
BY Katie Burgess Katie Burgess Assembly Reporter
WC 751 words
PD 14 June 2018
SN Canberra Times
SC CANBTZ
ED First
PG 2
LA English
CY (c) 2018 The Canberra Times
LP
The architect of the ACT's taxation reform says the move to re-balance rates paid by units and houses
was not a recommendation of his review, and should have been done with more finesse.
Former ACT Treasurer Ted Quinlan, pictured, was one of the first witnesses to appear before an ACT
parliamentary committee probing the change in formula for calculating rates and land tax for multi-unit
complexes on Wednesday.
TD
The change was announced in the 2016 budget and was to be phased in over two years, however that
was extended to three years in the most recent budget due to a backlash from owners, some who'd
seen their rates bill rise by 40 per cent in one year.
Mr Quinlan, a former Labor deputy chief minister, told the committee he had been rather reluctantly
drawn into the debate because his name "has been associated with rates".
In 2012, he carried out the root-and-branch review of the ACT's taxation system and, drawing upon the
recommendations of Ken Henry, called on government to abolish stamp duty and insurance taxes in
favour of rates and land taxes.
But Mr Quinlan said his review never recommended changing the rates formula for units and
apartments.
He said the only issue that was discussed and never completely resolved was whether people
occupying larger blocks of land should pay greater rates automatically (he believed they should not).
Instead, he said the change - which means that marginal rates are calculated on the unimproved value
of a whole block, not divided by the number of units first - came from a "legitimate" problem the
government identified in the 2016 budget - that the land value prescribed for units was far lower than
that of houses.
"Just on a straight one-to-one basis unit owners in a very plush unit would be paying more in rates than
someone just down the road in a pretty standard detached home. That is a problem," Mr Quinlan said.
But Mr Quinlan said the simple change in calculation failed to take into account the economies of scale
unit developments offered to government.
"Living in a unit complex does impose on the unit owners additional costs of just being in that unit," he
said.

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"For the privilege of reducing the cost of city services they also have to pay corporate fees, and all the
other things, and it's a legal requirement for sinking fund contributions over the first few years. It's quite
an expensive exercise to buy and live in a unit complex."
Mr Quinlan said while everyone appear to agree with the principle of the taxation reform, the change
had an "element of unfairness in it".
"If you read the 2016 budget, the government has realised they're not generating as much revenue from
units as they would like or might as compared to detached residences. That's what they've changed. It's
got nothing to do with the replacement of stamp duty," he said.
"Regardless of whether you're looking to abolish stamp duty or not they are seeking to normalise the
process but they've stuffed it."
He said to reverse the problem would take a bit of work, but he had faith in the "very bright young
people" in ACT Treasury.
"We talk about rating systems and everybody likes to use in the same sentence fairness and simplicity.
Now unfortunately those two thing can be at odds with each other but I'm going to suggest we come
down more on the side of fairness as opposed to simplicity," Mr Quinlan said. "I think there's capacity at
least in the middle level in Treasury to work through all this stuff and I'd be very surprised and somewhat
disappointed if some of this work hasn't already been done."
The committee interrogated four other witnesses who'd made submissions about the personal impact
they changes had on them.
Phillip Baron, who had a $400 per cent increase in his rates last year, said while he was "quite
comfortable" with the removal of stamp duty, "a percentage increase should be a percentage increase
across the board".
Landlord Alexander Popov said the extra costs would be passed on to tenants, some of whom would not
be in a position to buy even if investors exited the market and prices fell. The inquiry continues next
month.
NS e211 : Government Budget/Taxation | gpol : Domestic Politics | e21 : Government Finance | ecat :
Economic News | gcat : Political/General News | gpir : Politics/International Relations
RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
PUB Federal Capital Press of Australia Pty Ltd
AN Document CANBTZ0020180613ee6e00004