Revenue Neutrality

The ACT Government is not increasing the “tax take” although we are changing the “tax mix” from inefficient transaction taxes like conveyance, to efficient taxation on land values. That is, we are not increasing overall tax revenue.

The chart below shows the estimated total revenue that would have been received from general rates, conveyance and insurance duties if tax reform had not been implemented, and compares it with the actual revenues that have been achieved under tax reform from 2012-13 to 2014-15, and the estimated outcomes for 2015-16 and 2016-17.

Over the first stage of reform, total general rates, conveyance and insurance duty revenue is estimated to be $24 million less than what it would have been under the no-reform scenario over the first five years of tax reform.

Figure 2 Total cumulative general rates, conveyance and insurance duty revenue

 

Table 1 Reduction in conveyance duty for Stage 1 (2011-12 to 2016-17 for various property values)

	2011-12	2016-17 (Stage 1)
Property value	Duty ($)	Duty ($)	Reduction (%)
$300,000	9,500	5,460	-43
$400,000	15,000	9,460	-37
$500,000	20,500	13,460	-34
$600,000	26,250	18,460	-30
$700,000	32,000	23,460	-27
$800,000	37,750	29,210	-23
$900,000	43,500	35,710	-18
$1m	49,250	42,210	-14
$2m	116,750	101,800	-13

The table above shows that the reductions in conveyance duty have been greater for lower value transactions.

We have cut conveyance duty by more than 30 per cent for three-quarters of residential properties and half of commercial property transactions as a result of the first stage of tax reform.

Because of the Government’s tax reforms to date, the conveyance duty charge for most residential properties in the ACT is already significantly lower than the national average, and the lowest of all jurisdictions except Queensland’s rate for owner occupier properties.

Figure 3 shows a comparison of conveyance duty charges for a $500,000 property in each jurisdiction.

Figure 3: Conveyance duty payment for a $500,000 property

 

Note: The rate used for Queensland is the owner occupier rate. A higher rate is applied by the Queensland Government for investment properties.

Abolishing Insurance Duty

Insurance duties will be completely abolished from 1 July 2016, making the ACT the only state or territory to have completely abolished this tax. Prior to tax reform, a 10 per cent duty was levied on all general insurance premiums and 5 per cent on life insurance. The removal of this duty will assist households and businesses in the ACT to better afford the level of insurance cover they would prefer and reduce the level of under-insurance. For a household spending $3,000 on insurance each year, the annual saving
is $300.

 

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