For quite a while I thought that council rates are the land tax, but it’s not so. In Victoria, council rates consist of 2 parts. One part is called “municipal and garbage service charges” and it is not affected by the price of the property – meaning all the properties in the same council area pay the same. The other part is called “general rates” and it is affected by the value of the property – meaning those who have more expensive properties pay higher general rates.
How rates bill is calculated
First, council determines the annual budget for the new financial year – how much money they need to spend on all their services. Then they subtract from that budget all the money they get from government funding or loans. The amount that is left has to be raised from council rates.
Money for garbage collection and community services is divided equally amongst all property owners in the council area. That amount is also subtracted from budget and that leaves with the one final number. To get what they call “rate in dollar” that number is divided into value of all the properties in the council area. As a result, they get a very small number – such as 0.002849. Then it is multiplied by property value and the result is called “general rates”.
To demonstrate, let’s take property valued 350,000 and rate in dollar 0.002849:
General rates = Property value x Rate in dollar = 350,000 x 0.002849 = 997.15