The ACT has increased land tax for all homeowners and reduced stamp duty: should this approach be adopted by all states in Australia?
From 1 July 2012 the Australian Capital Territory (ACT) imposed land tax, in the form of general rates, on all homes in the ACT, including owner occupied homes on a progressive basis. Different marginal rates of tax are applied at different values of the land. The ACT is unique in that there is no local government so the ACT government was able to increase its general rates on owner-occupied homes and reduce land tax on investment properties and commercial properties. As a result of the resultant increase in government revenue, the ACT has substantially reduced stamp duty on real property conveyances with a view to abolishing stamp duty over the next 20 years. The ACT government undertook a review of its tax system in 2012 and one of the major recommendations was to broaden the land tax base to all principal places of residence and to abolish stamp duty on conveyances of real property. This approach follows the recommendations of the report into 'Australia's Future Tax System' chaired by Dr Ken Henry (Henry Tax Review). This paper will critically examine the current approach to the imposition of land tax in the ACT as well as the recommendations on the need to broaden land tax contained in the Henry Tax Review. In conclusion, the paper will assess whether or not the ACT approach should be adopted by all States in Australia and the Northern Territory.
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