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Council rates explained

by Chris Lang on October 3, 2007

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

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{ 12 comments… read them below or add one }

mike smith February 27, 2012 at 8:30 pm

why are rates anything to do with property values?
do we get more bang for our buck ? It should be re-named a wealth tax

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Chris February 27, 2012 at 9:45 pm

Very true!

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Carla March 7, 2012 at 12:52 pm

It’s so that the poor don’t get stuck with a hefty rates bill they can’t afford. Let’s not make the gap between the rich and poor too great. We are not so greedy that we’d be willing to make the poorer suffer because we don’t want to part with a tiny bit more, when it could make all the difference, are we?

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Mark April 30, 2012 at 11:13 am

I would like to know why when some one takes better care of their property they are punished. If myself and my neighbour earn the same amount of income and I choose to maintain my garden and paint the house and he chooses to gamble and let his house run down I am being penalised. When we both go to town we equally use all the town facilitys, but because I take some care in my property I have to pay more to take a dump in the council provided toilet. All houses should pay the same, we all use the towns facilty’s equally. I at times feel like putting an old car body on the front lawn and let the grass grow 2 feet tall and never paint and let it look like a pigsty so I can get the lower rate like my neighbour. Rates should never be based on how well one person cares for their property over their neighbour. Does the council feel I am a rich man because I paint my gutters and cut the grass? I can assure you I am as poor as my neighbour, but damn I pay a lot more for that dump.

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Tony January 30, 2013 at 5:42 pm

A fair point, but in truth a coat of paint and a well kept garden won’t affect your property value that much really. What really impacts the value of your home is the number of bedrooms and bathrooms, the suburb you live in, and the size of land that it’s built on. So, while you might pay $25 to $50 more than your feral neighbour even though you both live in a fairly good suburb, you both have 4×2’s and both have a large backyard – you probably pay $250 to $500 more than the single who lives in the dodgy suburb in a 2×1 townhouse with no back lawn – and in the grand scheme of things, that’s where the fairness comes in to it. The system might not be 100% fair, but being 90% fair is pretty damn good.

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guardianangel June 16, 2012 at 9:21 pm

I am looking into the whole existence and legal justification of Council rates.

When a council decides to employ hundreds of public servants. By your explanation above, we the people have no say over this but must pay for these costs.

The Council running costs, no matter how spendthrift, over indulgent and wasteful must be shared amongst us as a TAX.

Apparently Councils are not a legal third tier of government.
Our constituton states that only the Federal Government is allowed to impose taxes.
Paying an institution for services rendered like road improvements and tree lopping etc is one thing. But to have to stump up payments for numerous very well paid and overly secure public servants (Kingston Council employees cost $62million in one year) who do their best to justify their existence by making our lives a bit more miserable with their rules and restrictions upon our own property, e.g. creating and delaying rezoning episodes left right and centre; imposing numerous laws/ by laws and restrictions everywhere they can on, and invading the privacy of our properties is something different again.
I would put it to everyone that council rates are one of our biggest unquestioned forms of taxation. WE HAVE SIMPLY ACCEPTED IT LIKE SHEEP.

Councils somehow arbitrarily declare that prices have risen for property. Kingston Council THIS YEAR 2012 has determined that property values have increased 8% based on what they say are figures came in from the previous year. This in the midst of the GFC.!!! Im sure the real estate people would be surprised.

I think all of us would be surprised at this!

Even the Reserve bank disagrees with this in general terms saying that property values in Melbourne have cllapsed by 8%.

So how do we, property owners, challenge this?

IT IS TIME THAT WE THE PEOPLE LOOK AT THIS IMPOSITION OF A TAX ON THOSE WHO HAVE STRUGGLED TO HAVE THEIR OWN PROPERTY AND WHICH COSTS US HUNDREDS OF DOLLARS PER WEEK AND SEE IT FOR WHAT IT IS.

I WANT TO BE ABLE TO ENJOY STAYING IN MY HOME WHEN I GET OLDER.

AT THIS RATE (LITERALLY) I WILL HAVE TO MOVE OUT OR TAKE IN BORDERS.

Rates are a tax and Councils are run by unelected CEOs. Councillors deal with the small stuff but it is this money bonanza run by the internal office wihtin the Council that no one is noticing.

So therefore we should be like a small country and vote in the most capable treasurer/ manager to give us the best possible result for our money.

or
Give the whole Council structure the boot.
At present it is simply a vehicle to hundreds employ people who, out in the real world would l think, have difficulty holding down a proper job, pushing paper around.

I say privatise the service functions and show the rest the door.
Reduce the hands of government to a bare minimum. Councils were just as good 20 and 30years ago and did not invade our lives as much as they do now.

BUT OVERALL WE SHOULD HAVE A SAY AND AT THE MOMENT WE DO NOT. THIS SYSTEM IS UNDEMOCRATIC AND OUT OF CONTROL.

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Simon McGregor July 10, 2012 at 11:50 pm

I have just finalised the details on a development application for a ‘Granny Flat’ in my back yard. It was quite an exhaustive process that required numerous reports, plans, a BASIX report etc. The application fee and additional fee based on the value of the flat comes to over $2,200.00. I have also been told that there will be contribution fees payable, in addition to this. When my dad applied to build our first home in the Dooralong Valley 40 years ago, it was free to lodge a building application. How times have changed.
I now live ‘in town’ (Wyong) and the latest is that farmers now pay a contribution to council based on how many and how big the Dams are on their properties. WHY? because the water they apparently collect is in a catchment area. The rate we’re going will see us taxed on the air we breath, based on our lung capacity, daily activity and associated oxygen consumption levels and the carbon dioxide we exhale.
Forget carbon tax why not introduce a carbon dioxide tax.
I’m sure our government institutions could squeeze a little more out of us stupid, docile, It’ll be right Aussies.
Come on Australia enough’s enough, how about a bit of accountability from ALL our tier’s of Govt.

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Brenda Montgomery April 25, 2013 at 12:31 am

Council Rates for a 1 br. apartment in Cairns are $2200- pa. Council Rates in a little NSW country town called Deniliquin for a 1 br. unit cost over $1800- pa. This is EXTORTION.
Lets Compare that to a $1.25M 3 br House in Surrey Hills, Melbourne, the c.rates are $1800- pa or Hunters Hill, an Upmarket suburb of Sydney where most houses are worth more than $1M, rates for one house was $1800-. Likewise a house in the prestige suburb of Williamstown, VIC one street back from the water $1800- pa.
Cairns and Deniliquin councils are Scamming us BIG TIME.

Technically Council rates are a Voluntary Contribution. Australia has had ‘2’ Referendums about whether people wanted local councils to be a Legitimate third level of government and Both times we voted against it so local governments Are NOT legitimate entities. Various groups are working on getting rid of rates and councils including the CLRG group. Also look up the whirlpool forums website.

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Michael June 25, 2013 at 11:31 am

Council rates are a Land Tax. Says so in their own Governing Body the MAV, in Victoria. The Term ‘Rateable Land’ is also classed as a Land Tax in Blacks Law Dictionary.
Then you have the Vic. Land Tax act 2005 stating your Principle Place of residence is exempt from Land Tax.
Councils are also not legitimate legal bodies as the Commonwealth Constitution doesn’t mention them, hence why they are rushing the Referendum!
Vote NO for recognition of Local Government. Put them back in their place!

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susan March 4, 2014 at 7:08 pm

I would like to compare rural property rates in my area. Is there a website you can do this on? Or how can I do this?

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Ari June 22, 2014 at 2:13 pm

I have just bought a property in the QLD. Scenic Rim council area. I have already paid $10,000 in stamp duty & $1,000 in title registration fees + numerous other council property searches by the solicitor from the council. Obviously all this is not enough for the greedy bureaucracy. Only to receive an additional OWNERSHIP TRANSFER FEE from the council several weeks after the property was settled.
As I now have learned that Councils are not legally recognized entities as Government as they choose to operate under an ABN. In fact it seems that they are like a business or a shop down the road that must use an ABN. If the were legal Government they would not need to use the ABN. Obviously they can not be both, or what?
For me all they do is collect my rubbish as I have my own rainwater & septic
sewerage sytem.
My point is, that they are simply an entity inviting to contract rubbish collection service for which I should not be forced into involuntarily.
The additional ownership transfer fee of $93,00 is also in my view levied unfairly. All they have to do is enter a name onto thier address database for rates billing against the address.
What business is able to get away with this sort of charging and enforce it?
I can not go & lump a fee on my clients to pay for my computers or the use of them separately like the council is imposing in this case.

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Chris Lang June 22, 2014 at 9:16 pm

I agree, some fees are completely unjustified, such as the one you described here.

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