STRATA – ACT
There’s no silver lining without a cloud. Following the moves to cut stamp duty in the ACT, the Territory Government has announced in the 2017-18 Budget that rates for homeowners will increase.
This forms part of a long-term tax reform planned by the Barr Government, and the changes took hold in July. But how much of an impost is this going to be for those looking at Canberra strata as their next purchase?
The ACT rates changes in brief
By and large, the changes to rates impact units far more than houses. The ABC reports that biggest hikes for house owners are in Dickson and Campbell, who will face a 13 percent rise ($349 and $475 per year respectively), while some 80 suburbs across the ACT face rate increases even higher.
The hardest-hit area in the ABC’s analysis is O’Malley, where the difference between 2016-17 and 2017-18 rates is 33 percent, or $703. At the other end of the scale, unit owners in Franklin will only see a rate hike of 3 percent, or $23 per year. The Canberra Times reported that the average rate increase for this financial year is $250 and that this will go up by another $100 in the following 12 months.
There is a rationale for this – the ACT Government is now calculating rates based on land value, and dividing this by the number of units that occupy the relevant block.
“Under the previous approach, there were instances of rates being lower for million-dollar apartments in Kingston than they were for average-priced houses in Tuggeranong, and this was not fair,” a Treasury spokesperson told the Times.
The move has been met with criticism and suggestions that unit owners (who make up 29 percent of all impacted properties) have already faced enough rate increases. Nonetheless, the changes are here to stay, and it’s up to downsizers and first home buyers to make sure they are prepared for their next purchase.
The impact for Canberra house hunters
For now, the ACT Government has just made it easier to deal with stamp duty, rather than abolishing it outright. Until this happens, downsizers and first home buyers will have to contend with significantly higher payments than they may have been used to.
Downsizers in particular need to be careful to analyse the rates in the area they want to live. As the rate hikes are significantly lower for houses, it will be crucial to avoid bill shock in the fine print. For example – the ABC reports that in Florey, average rate increases annually on a unit ($303) will be nearly three times what they would be for a house ($107).
In nearly every case, rates for houses remain much higher than for units – but if lower ongoing costs were an incentive for downsizing, it will be important to budget for the future increases.
First home buyers can still access assistance in the FHOG, but this is now $7,000 (formerly $10,000) and can only be used for new builds or purchases. The Barrier Free conveyancing model also lets FHBs hold off on paying duties until after title registration rather than before settlement, which gives them more time to organise their finances to tackle both taxes and rates.
While the rate increases are not ideal for strata owners in the ACT, they are manageable. For any queries about how it works or for any information about owning strata in general, make sure to contact the team at Civium Strata.