Finance Minister Rachel Stephen-Smith and Treasurer Chris Steel discuss the 2025-26 ACT Budget. Photos: Ian Bushnell.
Canberrans will be slugged with a new health levy, increases in taxes and charges and general rate rises, including an extra impost for high-end properties, to arrest the ACT’s precarious financial position and bring the Budget back to surplus by 2027-28.
Treasurer Chris Steel’s first Budget mixes fiscal repair with a commitment to maintain services and the Territory’s $8 billion infrastructure pipeline.
Mr Steel said that with the ACT emerging from a cost of living crisis, inflation and interest rates falling and the economy growing, now was the right time to make difficult decisions to rein in the deficit and return the Budget to balance.
“Canberrans repudiated the deep cuts to the Public Service and services that they delivered just last month in the federal election,” he said.
“But as I flagged in Budget Review, there is a need to make difficult decisions in relation to the Budget to get it on a more sustainable footing.
“Our economy is now strong and provides a sound foundation to make sure that we have a more sustainable path for the Budget.”
A combination of revenue measures amounting to $722 million over the next four years and public service efficiencies that aim to save $282 million over the same period are designed to return the Budget to a $330.6 million surplus in 2028-29.
The 2024-25 deficit of $1.1 billion is expected to fall to $425 million in 2025-26, then $103 million in 2026-27, before returning to the black in 2027-28 with a $48 million surplus.
But net debt will continue to rise, reaching $13.6 billion in 2028-29. Borrowings will rise to $22 billion by then, incurring an interest bill of more than $1 billion a year.
To help get back to surplus, a $250 a year levy will be imposed on residential, commercial and rural property owners for four years to pay for a shortfall in health funding. It will show up on your rates bill and is expected to bring in almost $206 million.
Mr Steel said increasing demand in the ACT’s hospitals and less money from the Commonwealth had led to a structural hole in the ACT Budget that would have to be filled eventually by the Commonwealth meeting its agreed target of 45 per cent of the Territory’s health costs over the next decade.
“The Commonwealth contribution rate that they’re providing to the ACT’s hospitals and healthcare system is going backwards and if further action isn’t undertaken in the next five-year national health reform agreement negotiations to arrest that decline, then we could see that decline reach 33 per cent, which would be the lowest Commonwealth contribution rate to a state and territory in the country,” he said.
“So this is going to be an area of intense focus for myself as treasurer and the Minister for Health and the Chief Minister over the coming year to make sure that the Commonwealth recognises the extraordinary pressure on our hospitals, the level of growth and demand in our hospital system.”
Health consumes about a third of the ACT Budget, amounting to almost $3 billion in this Budget, including a record $1.19 billion worth of initiatives.
Treasurer Chris Steel: time is right for Budget repair but services won’t be cut.
The Treasurer has also gone after the wealthy with a new rates threshold for non-unit properties with an average unimproved value (AUV) of $1 million and commercial properties with an AUV of $5 million.
The residential properties will attract a tax rate of 0.5734 per cent, and commercial ones 5.9670 per cent and raise almost $18 million and $5.3 million respectively.
Rates in general will rise on average 3.75 per cent as part of the ongoing tax reform process but that will vary depending on the location. For example, Forrest residents will be hit with an 18 per cent rise, while in Aranda it will be just two per cent on average.
A single set of tax rates will also be restored for commercial properties from 2025-26 after the 2020-21 freeze due to the COVID pandemic.
Buyers of vehicles worth more than $80,000 will be slugged an eight per cent duty. The party may be over for electric vehicle buyers as well, with a cut to duty concessions from 1 September, meaning a minimum 2.5 per cent duty is paid on purchases. Duty paid will increase according to vehicle emissions and value. These measures will raise $100 million over the four years.
Motorists will also face licence fee increases and a six per cent hike in parking fees.
Employers will be hit with extra payroll tax, with a cut to the tax-free threshold from $2 million to $1.75 million and higher tax rates for big national employers from 1 July 2026. This is expected to raise an extra $171 million.
The Ambulance Levy, tobacco licensing fees, occupation licence fees and the Working With Vulnerable People registration fee will also go up.
Accompanying these revenue measures will be government directorates and agencies reining in their spending by restraining growth in non-employee expenses from 2.5 per cent to 1.25 per cent per annum over the four years of the forward estimates.
Directorates will be asked to identify savings, such as reduced use of consultants and less travel and in low priority areas.
Employee expenses will be held back except for health and school staff.
But the hiring freeze will be lifted from 1 July.
Mr Steel said it meant working smartly to use the resources the government already had.
He defended the general increase in government spending over the four years, saying services and infrastructure had to keep pace with population growth, now at two per cent.
“We’ve made the decision not to, not only not to make deep cuts to the services that government provides, but we’re also not cancelling infrastructure programs that are critical to support economic growth in the future and to support that growing population,” he said.
Finance Minister Rachel Stephen-Smith said the government had managed a really good balance of delivering on election commitments and doing some fiscal repair at the same time.
