Unit owners push for 'fairer' rates calculation

In a series of stinging submissions to an ACT Legislative Assembly inquiry, landlords and owner-occupiers have lashed the Labor-Greens government for changing the way it calculated rates for apartment blocks and unit complexes.

Before, rates were calculated after the property's unimproved value had been divided between the number of apartments of units there were on site.

That meant most apartments fell into the lowest tax bracket.

Now the rates are calculated on the entire land value, then divided between the number of units, pushing most unit owners into the top tax tier.

That simple change help the ACT collect $487 million in general rates last year, with rates revenue tipped to hit $627 million in 2020-21 according to budget estimates.

However thousands of unit owners signed a petition calling on the ACT government to reverse the recalculation, forcing the Legislative Assembly to set up an inquiry into the changes.

One landlord wrote to the inquiry to say the changes added financial pressure to his tenants, as he could not afford to absorb the increases of both the land tax and rates and had to increase rents by $40-50 a week.

Even that was not enough to cover his costs, and he said there was likely to be more rent hikes in future.

"I saw more delays in rent payments in the 2017-18 financial year comparing to 2016-17 financial year," he wrote.

"A young family with children have delayed their rent on one occasion in 2016-17. In the first six months of 2017-18 this family have delayed rent payments on four occasions. This family is considering moving out."

He even wrote to the Chief Minister's office on their behalf for help but was told "the most effective approach would be for such increases not to be passed onto tenants".

"I was left with a dilemma to either start running a charity by providing residential accommodation below market value or pass on the costs of the change to the tenants,'" the landlord said.

A 91-year-old war widow also wrote to the inquiry saying she  had been forced to cut back on heating, cooling and food to afford her rates.

"I did not expect that at the end of my life, living in this city would be so difficult," she said.

A spokesman for ACT Treasurer Andrew Barr said despite the change, general rates remain about 40 per cent lower on average for units than houses.

"In previous years, the general rates charges for units were significantly less than houses with similar market values and rental returns," he said.

"The change the government has implemented will establish greater equity in general rates between houses and units, the residents of which all share services such as roads, schools and hospitals."

But Jack Evans, who owns a three bedroom unit in Barton, said if the government wanted apartment owners to pay a more proportional share of the territory’s rates revenue, as it has claimed, it should have increased the fixed charge or created a poll tax.

“With a poll tax type charging, if strata units account for 29 per cent of total ACT dwellings, then 29 per cent of the residential rate revenue would be paid by strata units and the proportional share would be exactly equal,” Mr Evans said.

Mr Evans accused the government of distorting the taxation of one unit compared to an other.

He said despite having the same average unimproved value, the rates levied on a strata unit would be greater because a unit is part of a larger complex.

Mr Evans said while a freestanding house with an average unimproved value of $150,000 - the base tier for valuation-based charge - would have a charge of $440, this rose to $528.60 for a dual occupancy, $807.89 a unit per unit in a complex of 10 and $897. 25 in a complex of 200.

"A one-bed, one-bath, one-car-park unit in Landmark is liable to pay rates of $1823 a year yet a two-bed, two-bath, two-car-park unit in a much smaller complex on the other side of Blackall Street only has a rate liability of $1536 despite being worth around 50 per cent more than the smaller property," Mr Evans said.

"How can the government justify creating the circumstances where one unit is worth 50 per cent more than the other but is required to pay less than 85 per cent of the other unit’s rates? How can that be fair or equitable?"

The committee is likely to hold hearings before reporting back to the Assembly at the end of May.