At the request of the former NSW Premier, the Independent Pricing and Regulatory Tribunal (IPART) undertook a significant review of the local government rating system in NSW.
The purpose of this review was to identify how to improve the equity and efficiency of the rating system, in order to enhance councils’ ability to implement sustainable fiscal policies over the long term.
On 18 June 2020, the Government released its Final Response to IPART’s Final Report.
This response acknowledged that local government and the communities they serve need to have a more flexible rating system, whilst ensuring rates are applied fairly and more equitably to local communities.
A Bill has been prepared to seek to amend the Local Government Act 1993 (the Act).
Through this Bill, the Government proposes to implement the key reforms from its response in a way that is fair and reasonable for both councils and ratepayers.
An Exposure Draft of the Bill, together with this consultation guide, Towards a Fairer Rating System, have been released for public consultation. This provides a further opportunity to obtain essential feedback from councils, communities and other interested individuals and organisations until COB 5 February 2021.
The NSW Government believes that councils should be able to explore different options to distribute the rating burden more equitably, in consultation with their communities, and supports enabling greater use of differential rating in urban areas.
If passed by the NSW Parliament, this Bill would:
allow councils to levy special rates above the rate peg for infrastructure jointly funded with other levels of government without IPART approval
The Mackay Park pool is jointly funded and is infrastructure so Council would be able to levy a Special Rate increase from all of the Council ratepayers to help pay for the estimated $3m in annual overheads. The same would apply for a Special Rate to cover the proposed new dam on the Tuross River.
Before applying this special rate, a council will need to consult its community through IP&R about anticipated benefits of the project and special rate, anticipated total project costs, council’s contribution to those costs, the contributions to be made by others, the total special rate that would be levied, and how, and for what time period, the rates are to be levied.
Councils will also need to provide information in their annual reports on project outcomes, actual costs to council of this project, costs reported by other parties (where available) and the total revenue generated by the special rate. Where this differs from a council’s initial estimates, an explanation is to be provided
Do you have a property that can't be developed ? Then expect a new rating category for environmental land.
• allow councils to create more flexible residential, business and farmland rating subcategories to enable them to set fairer rates
• allow councils to create separate rating subcategories for vacant residential, business and mining land to provide additional flexibility for councils to tailor rates for local communities
IPART recommended councils be able to set different residential rates in contiguous urban areas, but only where there is on average, different access to, demand for, or cost of, providing services and infrastructure. It proposed that councils use geographic markers to define these areas, including postcodes, suburbs, geographic features (e.g. waterways, bushland) and/or major infrastructure such as roads.
This would allow Eurobodalla Council to decide which category each property should be in based on its characteristics and dominant use. Councils can also choose to create certain subcategories within each of these four categories, and to apply different rates to properties in each subcategory.
Examples might be:
- distance from the beach
- having a sea or water view
- backing onto a reserve
- being a block over 1000m2
Fortunately, under the proposed Bill, Councils must set a Revenue Policy each year as part of their Operational Plan. This sets out the combination of rates, charges, fees and pricing policies that will be applied to fund the services it provides to the community. It also contains a rating structure that determines rates and charges each type of ratepayer will pay, and how they will be calculated. Councils must consult on this structure as part of setting their annual Operational Plan and budget before it is finalised.
• remove the rating exemption for land subject to new conservation agreements and allow it to be rated under the new environmental land category
• limit postponement of rates on rezoned land and let councils decide whether to write off any debts, and
• allow councils to sell properties for unpaid rates after three years rather than five years.
Rates are calculated on the value of the land only, and do not factor in any improvements, such as buildings. For each rating category or sub-category, rates can be calculated based on:
• the (unimproved) land value of the property times the ad valorem (a rate in the dollar)
• a combination of the land value and a fixed rate per property (base amounts), or
• on the land value, but with each property paying at least a set amount (minimum rates).
Under the Act, the total income that a council can raise from rates each year cannot increase by more than a specific percentage – this is called the ‘rate peg’. The rate peg does not apply to charges for services like waste management, water, sewerage and stormwater.
The Independent Pricing and Regulatory Tribunal (IPART) determines the rate peg that applies to councils’ general income each year. For the 2020/21 financial year IPART set the rate peg at 2.0%. Councils can apply to IPART for a ‘special variation’ to increase their general income above the rate peg, e.g. to provide further services and replace ageing infrastructure.
To provide feedback, please complete the online submission form (HERE) which asks specific questions on key issues. There is an option to provide general comments in the online form.
You may complete the online form, or post or email the completed form, by the feedback closing date of 5 February 2021 to:
Office of Local Government, NSW Department of Planning, Industry and Environment Towards a Fairer Rating System Locked Bag 3015 Nowra NSW 2541 olg@olg.nsw.gov.au
