The Second Interval: evaluating the ACT’s 20 year Land Value Taxation transition after 8 years

Stamp duty Tax reform State and Territory budgets Taxation Government revenue Australian Capital Territory

In 2012, the ACT Government announced it would embark on a twenty year tax reform program, abolishing stamp duties and insurance taxes and replacing the revenue by increasing general rates for all landowners. The First Interval: evaluating ACT’s Land Value Tax transitionwas published in 2016, four years into this transition period. This report is the second of a series of five reports, to be published every four years, examining the progress and impacts of this ambitious tax reform agenda.

When the reforms were announced in 2012, the Government gave three main reasons for replacing stamp duty and insurance taxes with land tax (general rates): revenue predictability, efficiency and equity. They also promised that the reforms would be revenue neutral, reassuring residents that this was not a tax grab. This report focuses on assessing the impact of the reforms against these criteria as well as examining the impact on prices and rents.

Overall, the reforms are proceeding as planned and are achieving their stated objectives. Political risks remain, however, with the opposition currently promising to suspend increases in general rates for four years if they win this year’s Territory election.

Key findings:

  • Fears that the reforms would cause ACT land prices to fall have proven unfounded with continued rises in residential land prices and house and unit prices.
  • Owner-occupiers (including First Home Buyers) have increased from about 60% of the value of purchases in 2012, to 78% in 2020.
  • The average residential landowner paid $15,039 in rates during the reform period (between 2012-13 and 2019-20) but saw their land value rise by $63,681 over the same period.
  • The average Treasury forecast error for revenue has fallen from 7.9% before the reforms to 2.6% since the reforms began.
  • Substantial increases in general rates charges have coincided with slower growth of commercial land prices relative to residential land prices.
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