Blog Display

Big rates and land tax hike for Canberra apartment owners
31 May 2017 comments Kirsten Lawson

Big rates and land tax hike for Canberra apartment owners


Owners of units and apartments will face a big rates hike this year as the ACT government moves to bring their rates into line with freestanding houses.

Treasury officials say the average increase is $265 over two years - $150 from July this year and another $115 from July next year.

On top of that, rates for all homeowners, including owners of apartments, will increase an extra 7 per cent from July, and each year after that as part of the government's shift to higher rates and lower stamp duty. The average rates bill for apartments is $1156 this year.

But that's not the end of the bill shock for people who own units. If the apartment is rented out, owners will also face a substantial increase in land tax - averaging about $480 extra a year. More than 60 per cent of units are in that category. The government has not provided details of the land tax increase, but says there are about 26,000 units paying land tax and the new measure is expected to raise an extra $12.5 million in 2016-17.

The changes were foreshadowed in last year's budget and in March this year, Chief Minister Andrew Barr tabled a bill to change the formula for calculating land tax and rates on apartments in March. It has yet to be debated and passed.

Mr Barr said at the moment people who owned houses and units with similar market values paid significantly different rates and land tax. The new formula would "establish greater equity" and "rebalance the discrepancy".

The change is being phased in over two years to reduce the impact.

Treasury figures show a single house in Palmerston, Gungahlin, with unimproved land value of $274,000 pays rates of $1660. In comparison, owners of an apartment in Braddon in a 330-unit development pay an average of just $930 at the moment. The new formula will boost their rates to $1100, an increase of 18 per cent, which leaves them still paying less than the Palmerston house owner.

That doesn't count the 7 per cent rise that all ratepayers face. And it doesn't count the hikes in land tax for apartments that are rented out.

Apartments are an increasing focus of government revenue as the boom in apartment building continues and the number of new standalone homes stagnates. Until 2014, Canberra built more new houses than apartments, but since then the opposite is true. In 2015-16, 2507 new apartments were built, compared with 2164 stand-alone houses. In the eight months to February this year, 2092 apartments were built compared with just 766 houses.

In another example provided by the government, owners of apartments in a block of 120 units, with land value of $14.52 million, will pay an average $1450 in rates, compared with $1100 at the moment, an increase of 32 per cent (not including the 7 per cent across-the-board increase).

In many cases, the increase is off a low base. The Glebe Park residences, for example, have a land value of $5.9 million, according to Allhomes data. Each apartment in the block of 184 apartments pays an average of $850 in rates under the current system and will pay an average $940 under the new (plus 7 per cent).

Across the road, single homes on single blocks in Booroondara Street have land values of about $730,000, so a rates bill of about $4040 each (which will also rise 7 per cent from July).

Critics, though, point to the amount being charged per square metre of land, which for Booroondara residents on 1000 sq m blocks is only about $4, but for the apartment owners (whose "share" of the 10,400 square metre block is 56 square metres) is about $17 a square metre.

The change in formula means rates and land tax will be worked out on the value of the land for the entire apartment block, pushing the calculation into the top rating factor. Then the total rates is divided among individual owners. Under the current system, the value of the block is first divided into the individual owners, then their rates are worked out, meaning almost all apartments fall into the lowest rating factor.

The government is also changing the rating factors for land tax, but hasn't released the new figures. A spokesman said the thresholds had to be "recalibrated" to realistically reflect the spread of values, so not everyone was paying at the top rate.

 

Date: April 11, 2017

Source: Canberratimes.com.au

What's your property worth?

Receive your complimentary market appraisal and find out what your property is worth to rent.

Copyright 2017 Badenoch Real Estate Pty Ltd - ABN 42 083 726 425 | Privacy Policy | Site Map | Admin

Every precaution has been taken to establish accuracy of the above information but does not constitute any representation by the vendor or agent.
Real Estate CMS by Subtle Difference