ACT economy faring better than expected in state budget

After delivering a sobering economic update in October last year outlining a $951.5m deficit, this year the state’s position has improved with a deficit of $580.4m, largely due to increased revenue from population growth. The deficit is then expected to reduce even further to $229.4m in 2025-26. However, the State’s debt is expected to grow from an estimated $4.9b to $9.8b over the next four years.

The State’s unemployment rate is sitting at 3.1%, while employment growth is expected to return to 2% with international borders open and the State’s population increasing. Real Gross State Product 3% in 2021-22, and is expected to continue to grow at this rate over the coming years.

Revenue

The ACT is approximately halfway through a planned 20 year transition from stamp duty to a broad based property tax. The transition is being implemented by gradually lowering the stamp duty rates and increasing thresholds, while at the same time increasing the rates of property taxes. In line with that transition:

• the lowest conveyance duty tax bracket for residential owner-occupiers is being raised from $200,000 to $260,000 and the marginal tax rate for this bracket is being reduced;
• the lowest conveyance duty tax bracket for commercial land is being raised from $1,600,000 to $1,700,000; and
• the average property taxes are being increased by 3.75%, which is a lower annual increase than those experienced in the years prior to COVID (the increases were paused for 2 years as a COVID relief measure).

Notably, the increases are intended to apply to the amount of tax itself, and is not simply a percentage increase in the rate. For example, due to the recent rise in residential land values, marginal property tax rates for residential land have actually decreased.

The Budget also adjusts the eligibility criteria for the Home Buyer Concession Scheme, Disability Duty Concession Scheme, and Deferred Duty Scheme, enabling more households to access those schemes.