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Legislative Assembly for the ACT: 1996 Week 13 Hansard (5 December) . . Page.. 4475 ..

MRS CARNELL (continuing):

Indeed, the consultant's proposal resolved only part of the problem while creating further inequities in the system. To provide stability and certainty, the Government's policy in the past two years has been to simply apply a CPI increase to every ratepayer's bill. This approach was rejected by the Assembly for the 1997-98 rates situation. The Assembly has asked the Government to bring forward an alternative rating system.

Mr Speaker, the system that the Government is now proposing has the following key features: A fixed charge; an ad valorem charge based on unimproved valuations; a rolling three-year average of unimproved property values which will apply to both rates and land tax liabilities; a threshold to apply to property values; and separate revenue targets for the residential and non-residential property sectors. I will briefly address each of the key features.

The fixed charge of $220 partly reflects the cost of a wide range of services that are provided to all suburbs in Canberra. These include waste management, roads and traffic signals, local parks, streetlighting, stormwater and drains. The amount of $220 is significantly lower than the average cost per property of providing these services. The fixed charge also reduces the amount of the rates bill that is based on the property value, and hence reduces the potential for fluctuations in rates liabilities from year to year. It will not apply to rural properties, in recognition of the lack of direct services provided to these ratepayers.

The adoption of rolling three-year averages of unimproved valuations, as recommended in the 1994 rates review, acts to further reduce annual fluctuations. The introduction of a rates-free threshold means that the ad valorem component of rates is paid on only the amount of the valuation above the threshold. For example, a property with an unimproved value of $60,000 would pay rates on only $41,000, plus the fixed charge. The rates-free threshold makes it possible to protect owners of lower valued property from the adverse effects of the introduction of the fixed charge. This addresses the key problem with the recommendations from the 1995 rates review.

Mr Temporary Deputy Speaker, the exposure draft I am tabling today also introduces separate revenue targets for residential and non-residential sectors. This will stabilise the amount of revenue contributed by each sector annually and will put an end to the trend of recent years where the residential sector was shouldering an increased share of the rates burden. In 1997-98 the residential sector will contribute 85 per cent of total rates revenue and the non-residential sector will contribute 15 per cent. In recent years this ratio has moved from 80 : 20 to the current 85 : 15. We believe it is time to stabilise that trend in the interests of equity.

To illustrate the impact of the proposed system, tables providing suburb-by-suburb comparisons have been modelled by the Office of Financial Management. These tables compare this year's average rates with the proposed system, a flat CPI increase, and a return to the old system that applied under the previous Government. Two important points need to be made about this comparative exercise. The notion of capacity to pay, as reflected by higher property values, still has an influence under the proposed system. Where property values have risen, rates rise by more than the CPI, as in North Canberra. However, the degree of volatility as compared to the old system is

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