With Notice of Valuation letters currently landing in letter boxes from the NSW Government Valuer General, Bega Valley Shire Council has put together some fact sheets for shire homeowners to explain how this may impact their general rates.
Council’s CEO, Anthony McMahon said there is a need to explain how land revaluations impact rates as misinformation is being shared across the shire.
"Most importantly, an increase in land value does not result in an increase in rates income for Council,” Mr McMahon said.
“Land values impact the share of rates across ratepayers, not the total amount of rates Council collects.
“The only way Council can increase what it collects in general rates income overall is through the annual rate peg increase the NSW Government permits, or through a Special Rate Variation (SRV).
“These add a percentage increase on top of the overall general rates income Council can collect which is then distributed across all ratepayers.
“There is a misconception that if your land value doubles, then your rates must also double and that is not the case.”
General rates are made up of two key components:
The base rate, which applies equally to all ratepayers within a category (residential, farmland, business or mining)
The ad valorem, which is the component that is relative to the unimproved (or undeveloped) land value of the property.
“Within each rating category, rates are made up of a mixture of base rate and ad valorem. Council can collect up to 50% of the rates from the base rate, with the remainder being the ad valorem,” Mr McMahon said.
“Focusing on the ad valorem component, what you pay will depend not only on your land valuation but on all land valuations across the shire in relation to each other.
“For example, if every property in the shire doubled in land value, everyone’s rates would remain the same because everyone’s land value increased by the same relative amount.
“However, if land values change relative to each other, then the ad valorem amounts for each ratepayer will also change, although the total amount Council receives will not change – this just means the total amount of rates is shared differently by ratepayers.
“I often use a pie analogy when explaining rates. Think of Council general rates as a pie. The size of the pie can only be increased by the annual rate peg or an SRV.
“Each year once the increase in the size of the pie has been determined, which is typically the rate peg set by the NSW Government, Council then seeks to distribute that pie among all ratepayers. Everyone gets a standard size slice, the base-rate amount. The remainder of the pie is shared based on the unimproved capital value of your property. So the higher the value of your property relative to all other properties in the shire, the bigger the slice of pie you will receive.
“In the context of recent land revaluations by the Valuer General and the potential SRV, the changes to land values will not change the amount of rates income Council receives overall, however the Special Rate Variation, if approved, would.”
The draft Operational Plan and Budget is currently on public exhibition and includes two versions of the 2023-24 budget. One version assumes that Council’s revenue will only increase by the 4.1% rate peg and the other version assumes the SRV Council applied for is approved.
The Valuer General oversees the land valuation system and values all parcels of land in NSW. The most recent valuation was undertaken in late 2022.
To have your say on the draft 2023-24 Operational Plan, Budget and Fees and Charges, go to Council’s website.
More information is available on Council’s website.