How do your rates get set?
Councils help local communities run smoothly. They administer various laws and regulations to help maintain and improve services and facilities for the community. These services may include community services, sporting and recreation services, environmental planning, public health, environmental protection and waste collection, treatment and disposal.
The rates you pay allow your council to fund these services.
How rates are set and how they increase
Rate pegging
Under the Local Government Act 1993, the total amount of income that a council can raise from certain rates and charges is limited. This is called the rate peg percentage. The rate peg is determined on an annual basis. Because of rate pegging, a council's overall rates revenue cannot increase by more than the approved percentage increase. If overall land values rise, councils may have to reduce or otherwise adjust the amount of rates levied per dollar so that total income does not grow by more than the approved percentage increase.
The rate peg is determined by the Independent Pricing and Regulatory Tribunal of New South Wales (IPART). IPART determine the rate peg for all councils using a Local Government index. This index helps calculate the operating costs of councils in New South Wales. Visit IPART's website for more information about the methodology IPART uses to determine the rate peg.
Can your rates increase more than the rate peg?
Yes. Rate pegging applies to a council's overall general income and not to rates on individual properties.
Within rate pegging, it is possible for some rates to increase by more than the rate peg percentage, while other rates may increase by less than the rate peg limit. In some cases, rates may decrease from the previous year. A council's rating structure and valuation changes are the main factors that determine what happens to rates on an individual property. Rating structures may change significantly from year to year.
Special rate variations
Under the Local Government Act 1993 (Act), councils are able to apply for additional increases in general income beyond the annual rate peg amount. This is referred to as a special rate variation.
Under the Act, councils may apply for a single year increase under section 508(2), or a multi-year increase (of between two and seven years) under section 508A.
IPART has been delegated responsibility for assessing and determining special rate variations, however the NSW Government has retained responsibility for setting the policy framework under which applications will be assessed.
This is reflected in the Government’s Special Rate Variation Application Guidelines, which sets out the assessment criteria that IPART must use when assessing applications.
Councils may seek a special rate variation in order to undertake environmental works, fund town improvements, redevelop community and civic facilities, address maintenance backlogs and maintain or improve existing service provision.
Local councils that are seeking special variations to general income above the rate peg amount are required to submit applications to IPART for review and assessment.
The council must include details of its intention to apply for a special variation in its draft delivery program and operational plan and must consider any submissions received from the public.
If a council’s application is approved, IPART will specify the percentage by which the council may increase its general income.
Land categories for rates
Each parcel of land must be included in 1 of 4 categories for rating purposes:
- Residential
- Business
- Business city centre
- Farmland
A council decides which category your property should be in based on its characteristics and use. Most people are charged ordinary rates under the residential category.
Changing your land category
Categories are important because rates differ depending on the category of the land.
So if your land is categorised as residential you may pay a lower rate per dollar of land value than if your land is categorised as business.
If you aren't satisfied with the category given to your property, you may apply to your council for the category to be reviewed. If you do this, the council must notify you of their decision and the reasons for that decision.
If you still don't agree with the category given to your property, you may appeal to the NSW Land and Environment Court. You must do this within 30 days of receiving your council’s review decision. Contact the court to find out how to lodge an appeal.
A council may change the category of your land, but if they do, they must notify you of this change and advise that you can seek a review by the council if you don't agree with the category. This notice must also explain your appeal rights to the NSW Land and Environment Court.