In a national first, the Tasmanian Government has agreed to pay Council rates on most of its properties while Local Government has agreed to pay payroll and land tax. It is a development that has national implications.
In early 2001, the Premier’s Local Government Council (PLGC) agreed to examine the issue of taxation arrangements and to examine a raft of fees and levies between the two spheres of government in Tasmania. On 29 July 2003, an historic agreement was signed by the Premier, Jim Bacon, and Councillor Lynn Mason, President of the Local Government Association of Tasmania, to simplify and make more transparent the financial relations between State and Local Government.
The Agreement was the result of over two years of work by State and Local Government officials, working under the auspices of the PLGC. The passage of the State and Local Government Financial Reform Bill 2003 through Parliament on 6 November 2003, consolidated the Agreement in law. The major reforms include:
- The State Government paying Council rates on Crown land, apart from certain types of reserves, roads, bridges and associated infrastructure and Hydro land.
- Councils will be required to pay all State Government taxes including payroll tax and land tax, with the exception of parks, reserves and conservation areas.
- The abolition of up to $10 million in State Government levies on Councils, including library and planning levies.
Premier Bacon said the new arrangements would ensure that the true costs of providing government services would be taken into account when making decisions on how to use taxpayer’s money.
“The reforms will remove the hidden subsidies that have existed between State Government and Councils for some time,” the Premier said. “They will enhance decision making and lead to efficiency gains and greater economic benefits, as both levels of government take into account the true cost of providing government services.”
No other Australian State or Territory has an agreement on financial reform between the two spheres of government which mirrors the one now operating in Tasmania. Reforms of this nature have been considered in Tasmania on a number of occasions in the past, particularly since a comprehensive investigation in 1996, as part of the Review of State Local Government Roles and Functions.
The Agreement represents the culmination of a lengthy process of research and consultation with both levels of government. All councils were kept informed of progress at each stage of the project, through release of Discussion Papers on the various components of the project. In undertaking the reforms, decision making was guided by a set of principles, including revenue neutrality, financial transparency and non discrimination.
In applying reciprocal taxation, national parks, forest reserves, conservation areas, public parks and roads, bridges and associated infrastructure will be exempt from rates as these categories of land are considered non commercial and are provided in the public good. In addition, Crown land held by Hydro Tasmania will continue to be exempt from rating liability, given its highly capital intensive asset structure, which would make revenue neutrality difficult to achieve.
Despite the principle of revenue neutrality underpinning the reforms, the new arrangements are estimated to cost the State Government close to $4 million a year, to the benefit of Local Government.
The recent Federal Cost Shifting Inquiry acknowledged the national importance of the Tasmanian reforms by recommending that the Commonwealth and all State Governments pay rates to Local Government, “in line with the Tasmania’s State and Local Government Financial Reforms Act 2003, and associated Statewide Partnership Agreement.”
