Mr Barr said rents were falling because of oversupply and the tax was not likely to have a large impact. Rather, landlords would claim the cost in their tax, with the result that the Commonwealth would carry some of it.

But Liberal Treasury spokesman Brendan Smyth said the tax hit hardest at the lower end of the rental market.

“Investor margins are already fairly slim and people are doing it tough and if they’ve got a reasonable cost they will pass it on [to tenants] if they can,” he said. “If you’re a renter at the lower end of the market you can’t afford another six, seven $800 a year … a lot of these people are on bare bones.”

Land tax, which applies to 36,800 properties, is not the only expense to hit the wallets of Canberrans on July 1. Rates are up an average 10 per cent across the city. Parking fees are up 3 per cent across the board (with all-day parking in the city now $14, instead of $13.50), as are parking and traffic fines – 6 per cent higher from Tuesday.

The fire levy is up, with a big rise for businesses, and those with a licence to take water will face a higher water abstraction charge.

Electricity and gas prices also rise from Tuesday, a combined $300 on average. Gas is going up an average $213 a year and electricity $85. But once the federal carbon price is repealed, the electricity increase will be reversed, and Canberrans can expect an average fall in their bills of $143.

The Government's rates and land tax calculator was due to be updated by today, allowing people to calculate thier bill.

The changes to land tax, expected to bring in an extra $10 million a year, hit Canberrans with investment units.

For apartments with an unimproved land value of $75,000, the tax will nearly triple to $1210 a year. For an unimproved value of $150,000, the tax will increase $600, to $1570.

At the higher end, land tax will fall. A house with an unimproved value of $400,000 will save about $470, and a porperty worth $500,000, about $1000 a year.

Quizzed by the Liberals about the tax rise in estimates hearings, Mr Barr said the market could absorb the change, given the fall in rents by as much as 20 per cent over two or three years.

“I suspect the impact on the rental market will be negligible and, given what’s in the supply pipeline and the fact that ultimately rents are an interaction of supply and demand, it’s highly likely that rents will continue to fall in the territory in the short term,” he said.

Landlords could write off the cost in their tax returns, so in the end the Commonwealth would wear some of the cost, he said.

“Obviously the negative gearing arrangements in this country mean that all of those costs are tax-deductible expenses,” he said, describing the tax rise as to some extent “passing back a cost shift that the Commonwealth imposed on us through their budget”.

The change shares land tax more fairly between units and houses. Until July 1, a house rented for $350 or $400 a week attracted significantly higher land tax than a unit rented at the same price.

Houses were 44 per cent of the rental market but paid 78 per cent of the land tax. Units were 55 per cent of the market but paid just 22 per cent of the land tax.

The Liberals’ Andrew Wall said the change put disproportional pressure on rental properties at the lower end of the market. An apartment with an unimproved value of $100,000 faced an increase of $700 a year, which would be passed on to renters, he said.

“You’re here today telling us that property rental prices are falling, so not only is the investor copping it on the rental front, but then you’re reaching into their pocket and taking an increase of land tax and an increase of rates. Why do you continue to punish people that try to provide affordable housing?” he asked.

Mr Barr said he had to find the fairest ways he could to boost revenue. “Yes, we have made some changes in the budget that increase revenue, but we have sought to do so in a way that is consistent with our principles and the principles of simplicity, fairness and effectiveness within our taxation system,” he said.