Australian Local Government Association

The collection of property rates in Australia - a state by state description

Western Australia

In Western Australia land is valued by the Valuer General's Office (a state government agency) and those values are forwarded to each Local Government.

Two types of values are calculated:

1. Gross Rental Value (GRV) for urban land/buildings; and
2. 2Unimproved Value (UV) for rural land.

To calculate the rates payable, Local Governments multiply a rate in the dollar by the land value. The per dollar rate is determined by the level of revenue the council wishes to raise and is dependent on their proposed budget.

There are provisions for councils to create differential rates to shift the revenue raising effort to certain sectors of the community i.e. commercial property. Also councils can create "specified area rates" for specific services to a particular group of properties. A minimum rate is also normally set.

There are also a small range of "service charges" which can be set by councils for specific services like community security, which whilst not specifically referred to as rates, contribute towards the total revenue raising capacity of a Local Government body.

South Australia

In South Australia, the Local Government Act 1999 establishes an autonomous power for local Councils to levy rates on property owners or tenants, based on the value of their properties.

Total rates cannot exceed the amount determined to be raised in the Council's budget (however this is not limited by the State in any way) and the Council must adopt valuations for the entire area before setting the rate in the dollar. A range of options are available to Councils in setting rates including:

• setting a minimum rate
• having a fixed charge apply to all properties plus a rate
• differential rates for different categories of land use; and
• two-tiered rating (applying a different rate above certain property values) to ensure that the incidence of rates best matches the capacity and needs of the community.

The State government funds a pensioner concession and Councils have the capacity to defer rates until the sale of a property or to rebate rates. Council rates are payable quarterly and options are available for other payment terms in instances of hardship.

More information can be found on www.lga.sa.gov.au.

Queensland

Queensland general rating system works on a "capacity to pay" basis with the unimproved value of the land being the determinant for "capacity". The Local Government Association of Queensland is currently evaluating the benefits of site valuation.

Unimproved valuations are determined by the State Government so that Council has no influence over the value used for rating. Owners can appeal to the land court if they think their valuation is inappropriate.

Land owners and occupied by the State or Commonwealth does not pay rates except for commercial activities.

Services such as water, wastewater and waste are covered by utility rates and charges that are based on the principles of user pays and Full Cost Pricing and are not collected via general rates.

Councils have a number of methods they can use to gather general rates from the properties in the Local Government Area.

1. General rates - where the same rate in the dollar is applied to all land valuations in the area. A minimum can apply.
2. Differential rating where land can be categorised by the Local Government and a different rate in the dollar applied to each category. A category can have one property in it. For example there might only be one mine in the Local Government Area. Mining leases have vary low values as the land is worth very little (the minerals are what determines the market values of the lease). The mine might place a large impact on the Council's roads and other services so Council can make a differential rating category for that property. A minimum can apply.

Other ways to class land for differential rating categories include land ownership and occupancy, valuation levels (these can be charges different rates for different bands of valuation), location, land use etc. The Act is now very flexible.

A Local Government must receive some rates from either a general rate or differential general rate on properties.

1. Queensland Local Governments can also use special rates to bring in moneys from some property owners who receive services that others do not. An example might be canal levies, rural fire levies and special road upgrade levies.
2. Separate rates where a flat dollar rate or a rate in the dollar is applied to all properties in the Area for a service. This could be a green or brown environmental levy, civic amenity level or road levy. One Council charges all properties $150 per annum for roads. The remainder of the annual costs for roads comes from the general rate. The in effect recognises all properties get some level of benefit from roads and then the rest of the funding is a pure tax.

Queensland legislation also provides for Pensioner Concessions, deferral of payments and arrangements for payment for those having difficulty meeting the payments. Some Queensland Local Governments are no longer providing discounts but others provide anything from a flat discount to between 5 and 15 per cent. Interest on overdue rates is usually charged at 11 per cent. Councils can summons for rates as soon as they are overdue.

They can sell mining leases for arrears of rates after 3 months of overdue rates and they can sell vacant land, commercial land for arrears of rates after 1 year of overdue rates. They can sell other properties after three years of overdue general rates. Local Government's are autonomous in the amount of rates that they obtain from their rate base and can budget for a surplus if they wish.

New South Wales

Approximately half of New South Wales Local Government revenue is raised by rates on land. The rate is based on the unimproved capital value of land. There are four major rating categories - residential, commercial, agricultural and mining. There is also the option of inserting subcategories under these headings. A different rate may apply to each category or subcategory. Councils may also apply minimum rates.

New South Wales is subject to rate pegging or rate capping. This means that the Minister for Local Government annually determines the amount by which councils can increase their general revenue (which is primarily revenue raised by property rates). For example, the generic limit was 3.6% in the current year. This means that rates do not necessarily increase in line with land values. Councils may seek special variations beyond this limit by application to the Minister. Changes to this system are currently being sought.

Victoria

Victoria's 79 councils operate as separate entities with different local issues, costs and service provision needs. Each council budget is different to reflect local community needs and priorities. However, there is a common legislated framework for setting a budget that councils must follow, as set out in the Local Government Act 1989.

Each year a council establishes the maintenance needs of its assets and infrastructure and the community services and facilities that will be provided in the next financial year, and how much this will cost. This information is adopted as a draft budget, which is advertised and open to public comment for a minimum of 14 days, as required by legislation. This process enables community discussion and input into the development of council priorities for the coming year. Within a council budget is the estimated revenue that will be collected from other sources such as State and Federal Government funding and from loans. Councils then determine the amount required to be collected in rates to meet their financial responsibilities.

Council rates can comprise up to three components - municipal charges, waste charges and rate in the dollar per property value.

Councils begin the rate process by determining any municipal and waste (service) charges in order to recover part of a council's administrative cost and the cost of providing waste collection, recycling and disposal services respectively. Once these discretionary charges have been accounted for, councils determine the rate in the dollar by dividing the balance of the required budget revenue by the total value of all ratable properties in the municipality. The rate in the dollar is then multiplied by the value of a property (using one of three valuation bases) to establish the amount to be paid by each property owner. This amount is known as the general rates.

General rates are added to any municipal and garbage charges set by a council to determine the total rates payable on a property.

Each Victorian council chooses one of three valuation bases for their municipality - Capital Improved Value (CIV), Site Value (SV), or Net Annual Value (NAV).The common process for calculating each of the three valuation bases is as follows:

• Every two years council valuers have a statutory requirement to conduct a review of property values based on market movements and recent sales trends
• Council valuers undertake a physical inspection of a sample of properties
• The total value of the municipality is used as the base against which a councils strikes its rate in the dollar
• The rate in the dollar is multiplied by the CIV, SV or NAV value of the property to determine the general rates due on each property
• The Valuer General is responsible for reviewing the total valuation of each municipality for accuracy before he certifies that the valuation is true and correct.

CIV refers to the total market value of the land plus the improved value of the property including the house, other buildings and landscaping, as determined by a valuer.

SV refers to the unimproved market value of the land. NAV is the annual rental a property would render, less the landlord's outgoings (such as insurance, land tax and maintenance costs) or 5% of the CIV for residential properties and farms. The NAV is therefore generally higher for commercial/industrial and investment properties.

The vast majority of Victorian councils use the CIV base.

Tasmania

In Tasmania, Local Councils levy rates on property owners or tenants, based on the value of their properties.

Total rates cannot exceed the amount determined to be raised in the Council's budget (however this is not limited by the State in any way) and the Council must adopt valuations for the entire area before setting the rate in the dollar. A range of options are available to Councils in setting rates including:

• setting a minimum rate
• having a fixed charge apply to all properties plus a rate
• differential rates for different categories of land use; and
• two-tiered rating (applying a different rate above certain property values) to ensure that the incidence of rates best matches the capacity and needs of the community.

The State government funds a pensioner concession and Councils have the capacity to defer rates until the sale of a property or to rebate rates. If rates are not paid for a period of three consecutive years a Council has the capacity to acquire the property and sell it to recover the rates - as a result there is no significant problem in recovering rates.

Uneven valuations (particularly caused by rising values of coastal properties) in recent years has caused significant community concern and Councils have and are working hard to use the options available to meet these concerns.

Australian Capital Territory

Rates Calculation for 2005-06

Calculation of rates for different types of property is as follows:

Standard Properties:

FC + ((AUV - $22 000) x P)
The amount of rates payable for 2005-06 has two components - a fixed charge (FC) and a valuation based charge for each ratable property. Each property is liable for the fixed charge together with the valuation based charge. The valuation based charge is calculated using a rating factor or percentage (P) and the average of 2003, 2004 and 2005 unimproved land values of your property (AUV). There is no liability for the valuation based charge on the first $22 000 of the AUV.

Unit Properties: FC + (((AUV x UE) - $22 000) x P)

Rates for units that are part of a registered Unit Title Plan are subject to a similar calculation that is applied to all other properties. Each unit is liable for the fixed charge (FC) together with the valuation based charge. The valuation based charge for each unit is calculated using the average of 2003, 2004 and 2005 unimproved land values (AUV) of the entire Unit Title Plan which is multiplied by the individual unit entitlement (UE). The rating factor or percentage (P) is then applied to the individual unit portion of the AUV that exceeds $22 000 (rate free threshold). There is no liability for the valuation based charge if the individual unit portion of the AUV is $22 000 or less.

Fixed Charges (FC) and Rating Factors (P)

There are different fixed charges and rating factors for residential, commercial and rural properties. The fixed charges and rating factors for 2005-06 are as follows:

Northern Territory

In the Northern Territory all land within a municipality is rateable except certain categories of land such as Crown land. Rates can be levied on the basis of a rate in the dollar times the land value (with or without a minimum being payable). Differential and flat rate per parcel rates can also be levied along with a combination of these rating methods (so long as they do not apply to one parcel of land).

A municipal council (of which there are only six) can adopt as a method of determining the assessed value of all rateable land in its area using:

1. the unimproved capital value
2. the improved capital value, or
3. the annual value

as it appears in the valuation roll of the Valuer-General.

Municipal councils can also raise a 'local rate' based on the assessed value of the rateable land for the purposes of defraying costs on functions or repaying loans on functions.

Community government councils (of which there are 30) generally levy general rates on the 'flat rate per parcel' method even though some of them (where there is land that is not 'Aboriginal Land') can adopt the same methods as municipal councils. These councils, in some instances, also levy 'general service charges' in lieu of property rates (that is the equivalent or better to general rates) to compensate for their inability to raise general rates successfully on Aboriginal land due to the Aboriginal Land Rights (Northern Territory) Act. They have to do this because such land is held under 'communal title' and therefore is not subject to separate allotment charge nor can the land be sold to recover unpaid rates.