In February 2018, the ACT Legislative Assembly agreed to a public accounts committee inquiry into the way rates and taxes are calculated for strata properties. This emerged, in part, from a petition sponsored by the Owners Corporation Network, supported by strata managers, asking the assembly to return to the previous system of calculating rates and land tax. Almost 5800 Canberrans supported this petition.

The inquiry is nearing an end. It received 97 submissions and heard from many unit owners.

Like every household in Canberra, unit owners have experienced abnormally high increases in the fixed rates charge, the valuation-based rating charge, the fire and emergency services levy, the safer families levy and, where rented, new and increased fixed charges for land tax and increased land tax valuation-based charges. This is a feature of the taxation reforms that began in 2012-13.

Units have experienced additional increases because the rates and land tax valuation basis changed. The scale of the increases has been significant. In 2017-18 some units experienced a 109 per cent increase in just their valuation-based rates charge. In 2018-19, government data shows only 4.3 per cent of units experienced a rates bill increase below 5 per cent, while 55 per cent experienced an increase great than 10 per cent. By comparison, just 12 per cent of houses experienced an increase greater than 10 per cent. This was in a year when the rating factor for the highest value-based threshold was reduced.

We have provided research that demonstrates the change was based on nonsensical valuation comparisons, introduced new inequities between equivalent units in similar complexes, impacts most heavily on higher density complexes and is impacting on lower income and renter households.

More recently the Owners Corporation Network has collated many examples that demonstrate unit owners and renters are severely disadvantaged. These examples illustrate cases where lower valued units in a large complex have significantly different rates and land tax to those in smaller complexes with similar valuations. Similarly, they illustrate houses on 800 square metre blocks pay several hundred dollars less in rates and land tax per year compared with units occupying less than 200 square metres of land but with very similar sale, rental and unimproved values.

Furthermore, we have presented arguments showing the changes are inefficient, inequitable, impact negatively on costs of living and increase the risk of tax leakage. Worse, the changes may have negative effects on housing affordability, urban renewal, environmental sustainability and decisions to age in place. Many submissions to the inquiry made similar arguments.

Contrary to the government claims, there is no evidence the changes are fairer or more equitable.

In short, the inquiry and estimates have heard the government is making more revenue from unit title properties with no change to the rights or valuation of the land the units sit on. This means the government is transferring the burden of persistent budget deficits and slow progress on tax reforms unfairly to one housing type because it is seen as an easy target.

We acknowledge we have had positive dialogue with the government and local parliamentarians in our direct discussions.

However, public statements from government are concerning, bordering on a flippant disregard for the wellbeing of affected households. Giving evidence to the inquiry, the leader of Treasury made an extraordinary revelation that Treasury had not and could not measure the impact of the changes on rents.

Our research shows in 2016 about 26,500 units were rented, which is about 52 per cent of total unit stock, and the government has a complete record of these properties. Adding to this, the Chief Minister told the inquiry that “the methodology for collecting rates will not change under a government I lead. Full stop. I am not countenancing that ever”, despite evidence the valuation method is not achieving the government’s own goals.

As the inquiry concludes, the territory is in a remarkable situation where unit owners and investors have clearly articulated the extent of the substantial negative impact of the changes on their own household costs and rents, the junior Green-Labor coalition partner is touting for a change in valuation method and the land tax system, the Opposition is committing to change; yet the executive is unwilling to commit to even look at the issue and Treasury is saying it is unable and unwilling to look at alternative models.

What has been made clear to the owners network is that no change to the new rating methodology will happen under the government’s own steam. Only the inquiry report will determine what the government considers.

We encourage inquiry members to consider the real financial and human costs, and the wider policy impacts on the costs of living caused by the inefficient and inequitable changes to strata properties.

The owner network, on behalf of all unit owners, calls on the inquiry committee to recommend an immediate reversal of the new methodology.

We support the objective of covering the costs of essential services. We also accept there are complicated mechanisms in the current system. Alternatives which are not complicated were proposed during the inquiry hearings, options that at leas

t solve the catastrophe of charging different rates for similar units solely because of differences in the values of the respective complexes.

If it is not able to identify a workable solution, we encourage the inquiry to recommend the assembly be tasked with an open and transparent inquiry to deliver a reform model for the entire land taxation system. This inquiry should have the powers to compel analysis and seek expertise able to analyse proposals and it should assess the total revenue requirement genuinely.

If it remains only the executive who cannot see the need to fix this problem, and the committee inquiry does not recommend reform, we encourage unit owners to continue telling their story out loud until there is a leader who can commit to genuine reform, and certainly during the lead up to the October 2020 election.

Gary Petherbridge is president of the Owners Corporation Network ACT.