FIRST-time Treasurer Andrew Barr has described the 2012-13 ACT Budget as a “reform budget”, launching an overarching and “nation-leading”, five-year taxation reform for the Territory.

It comes as no surprise after last month’s release of the Government’s response to Ted Quinlan’s ACT Taxation Review, when the Government agreed to 15 of the 27 recommendations, and agreed in principle to most of the rest.

Barr said ACT taxes were “inequitable, volatile and inefficient” and the reform is based on the redistribution of wealth to support the battlers – a reform that has been on the Government’s radar for years.

“We will be taking the steps… to reform our tax system, nation-leading reforms in tax, and to make some strategic investments to meet the service needs of this community and to ensure our community continues to grow,” he said.

According to the tax reform, from June 6, stamp duty will be reduced by up to 45 per cent over the next five years with hope of complete abolition in 20 years.

“From tomorrow a family buying a $500,000 home will pay $2450 less in stamp duty than they would pay today,” Barr said in his Budget speech.

“In five years time the stamp duty on a $500,000 home will have reduced by over $7000.

“This represents a 12 per cent reduction from tomorrow, rising to a 34 per cent reduction in five years time.

“This will deliver more affordable homes to more Canberrans.”

Also part of the reform is the abolition of commercial land tax, however it will come at a cost; it will now be absorbed into the current general rates.

Surburbs hardest hit include the most affluent; Forrest, Red Hill, Yarralumla, Deakin, O’Malley while suburbs including Casey, Tharwa and Lyneham will experience small increases in general rates with new suburb Bonner experiencing a small decline.

Barr said the land tax cut for landlords who rent low and medium priced properties, was to “put downward pressure on rents and encourage investment in the kinds of housing which are in the shortest supply”.

“Properties that will see the biggest reduction will be those with land valued at $300,000 – with up to $368 slashed off land tax,” he said.

“Based on averages, a rental property in Chisholm will see a reduction of $307 in land tax a year – good news for renters and good news for investors.”

However he said the change in rates will be introduced in a series of “progressive marginal tax rates to replace the existing flat valuation based charge”.

“The fixed charge paid by all Canberra households will remain the same at $555,” he said.

“Under the new scale, rates will decrease for around a quarter of properties.

“The average increase will be $123 per year or $2.35 a week. This will be offset by the reductions in insurance costs, stamp duty and rents.”

The reform will also include the abolition of duties on general insurance – home, contents and motor vehicle insurance – and life insurance, starting from October with an annual reduction of 20 per cent over the next five years.

“Every business in the ACT will see a reduction in their business insurance,” he said.

“Around one third of households on the most modest incomes – those earning up to $30,000 – do not have insurance. In contrast, almost 100 per cent of households on the highest incomes do.”

Payroll tax for local businesses will be cut from July 1, with the tax-free threshold being increased from $1.5 million to $1.75 million for liable businesses.

“This will give the ACT the highest payroll tax threshold in the nation, and make us the lowest-taxing jurisdiction for businesses with a payroll of up to $4.7 million,” he said.

Barr said under the reform, 115 businesses will no longer pay any payroll tax and allows those bussinesses to employ up to five extra people before paying the tax.

“This will create the conditions for an extra 575 additional jobs in our private sector,” he said.

“In addition about 1865 businesses will get a tax cut as a result of the higher threshold, putting about $6.8 million back into local businesses, further boosting job growth and investment.”

Car registrations will also be affected by the new reform, with registration costs now based on the car’s environmental performance.

A number of legislative amendments will also be made to improve the functionality of various taxes including: the clarification that the dutiable value of a land rent lease has the same value as a normal crown lease; changes in wholesale unit trust schemes to be more aligned to NSW; the abolition of duty on transfers of subleases less with a term less than 30 years; and amendments to the Land Rent Scheme.