ACT Budget Forecast falls short in reality

Friday 20 May 2016
Nic Crowther's picture
Co Editor
The Shaker

The ACT Government’s Lease Variation tax continues to fall short of expected revenues according to the March quarter budget update.

For every year since its introduction the tax has failed to live up to expectations, making it an easy target for the ACT opposition in an election year. In fact, since being introduced in 2010-11, the revenue shortfall on projections stands at $30 million – or around 40 per cent.



On the surface the tax makes sense. As the government moves away from stamp duty on property sales, the strategy aims to hit the developers who apply to use low density land for medium or high density dwellings, therefore delivering more profit as a result of increased sales.

Naturally, the ACT Liberals hate this tax, and have vowed to abolish it as the first opportunity. The opposition believes the tax is a handbrake on development, and will hinder supply of new stock that could alleviate the stresses of housing affordability.



Given the poor returns on the tax so far, this is an easy promise to make ahead of the ACT Election. Just how many property developers are drowning under the weight of a tax that is collecting less than 25% of its projection remains to be seen.

Anyway, if you think that the ACT Government is in trouble over this (it really isn’t), then cast your eyes over to the West. Premier Colin Barnett has found himself at the bottom of a fiscal hole thanks to a dramatic reduction in royalty payments as commodity prices continue to languish.



Revenues were down $5.5 billion on projections. However, blame for the Treasury’s $3.9 billion deficit has been sent across the Nullarbor to the Federal Government and its distribution of GST receipts.

Western Australia receives only 32 cents from every dollar it raises – a likely gap of $4.4 billion for 2015-16. As long as the WA Government can keep sheeting blame to anyone but him for the increase to state debt, the mounting pressure over his leadership can be managed.

At the end of the day, the old adage “It’s the economy, stupid” holds up as well now as it did 20 years ago.