The ACT's Rates System: Land Tax by Another Name - and Renters Still Pay

What Happened in the ACT?

In 2012, the ACT Labor government - with Greens support - began one of Australia's most ambitious tax reforms: abolishing stamp duty on property transactions and replacing the lost revenue with higher annual rates. The plan was to phase out stamp duty over 20 years, with rates rising each year to compensate.

On paper, this sounds reasonable. Stamp duty is widely criticised by economists as an inefficient tax that discourages people from moving, upsizing, or downsizing. Replacing it with a broad land tax, spread across all property owners, has genuine economic merit in theory.

In practice? The rollout has been a financial shock for many Canberrans - and the people bearing the heaviest burden aren't the ones who were promised relief.

The Numbers Are Hard to Ignore

ACT residential rates have risen dramatically since the reform began. According to the ACT Revenue Office, average residential rates have more than doubled in real terms since 2012. A home that attracted rates of around $1,200 per year in 2012 might now attract $3,000–$4,500 or more, depending on the unimproved value of the land.

The ACT government has consistently delivered above-inflation rates increases. In the 2023–24 budget, average rates rose by around 8% - well above the CPI - continuing a pattern that has compounded year after year.

Meanwhile, stamp duty has not been abolished. It has been reduced - but only for owner-occupiers purchasing modest homes. Investors still pay stamp duty, and the full phase-out remains decades away. The government has, in effect, been collecting both stamp duty revenue and higher rates revenue during the transition period.

Why Renters Pay Too - And Nobody Talks About It

Here's the part that gets glossed over in the official narrative: renters don't own property, but they absolutely pay rates.

Landlords are businesses. When their holding costs rise - including rates - those costs get passed on through higher rents. This is basic economics, and there's no mystery about it. A landlord facing an extra $1,500 per year in rates doesn't absorb that cost out of goodwill. It gets baked into the next rent review.

Canberra already has some of the highest median rents in Australia. As of mid-2024, the median weekly rent for a house in the ACT sits around $700–$750 per week, according to CoreLogic data - consistently among the top two or three jurisdictions nationally. The rates reform hasn't made housing more affordable for renters. If anything, it has added upward pressure on an already strained rental market.

The reform was sold as reducing barriers to home ownership. But if you're a renter who can't afford to buy - often the people with the least financial flexibility - you get the worst of both worlds: no stamp duty relief (you're not buying), and higher rents (because your landlord's costs went up).

Who Actually Benefited?

The clearest winners from the transition have been:

• Property investors who sold frequently - they saved on stamp duty each time they transacted
• Developers - lower transaction taxes reduce friction on large-scale purchases and sales
• Recent owner-occupier buyers - who received stamp duty concessions at purchase time

The clearest losers:

• Long-term homeowners on fixed incomes - particularly retirees who own their home but face relentlessly rising rates bills with no corresponding income growth
• Renters - whose landlords pass costs through in the form of rent
• Anyone on a tight budget - because rates are not means-tested and don't flex with your financial situation

The ACT government does offer a rates hardship scheme and some concessions for eligible pensioners, but these are narrowly targeted and administratively burdensome to access.

Why Does This Policy Persist?

This is where it gets politically interesting. The rates reform enjoys strong support from economists, Treasury modellers, and property industry groups. It fits neatly into the kind of technocratic policy that looks elegant in a budget paper but feels brutal in a bank statement.

Both Labor and the Greens in the ACT have backed the policy consistently. The Canberra Liberals have periodically criticised rates rises without offering a coherent alternative - because abolishing the reform would mean either reinstating full stamp duty or finding billions in replacement revenue.

The policy persists because the people who could change it benefit from it, or are ideologically committed to it - and the people who suffer most from it (renters, in particular) have the least political leverage.

Renters don't organise into powerful lobbying groups. They move more frequently, are less likely to vote in local elections, and their connection between rising rates and rising rents is diffuse enough that it doesn't crystallise into electoral anger the way a direct tax bill does.

What Would Voters Actually Choose?

This is exactly the kind of policy question that a direct democracy would handle differently.

If Canberrans were asked directly - not through a representative who needs to balance party platform, donor relationships, and ideological commitments - whether they wanted rates to rise 8% above inflation while stamp duty remained only partially abolished, the answer would almost certainly be no.

If they were asked whether renters should receive any protection or rebate to offset the cost pass-through from rising land taxes, many would say yes.

If they were asked whether a 20-year transition plan that front-loads the pain while back-loading the benefits is acceptable, most would demand a rethink.

The ACT rates system isn't necessarily a bad idea in principle - land value taxes have genuine merit. But the implementation has been opaque, the burden has fallen unevenly, and the people most affected have had no meaningful say in how it was designed or delivered.

That's not a tax policy failure. That's a democracy failure.

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