Basic Local Government Rates

Local Government rates can be extraordinarily complex in application - but is quite simple conceptually. If you bear in mind a few key concepts and rules, the line items appearing on your rates notice should be easy to figure out. And if you are a Rates Officer in local government, these key concepts and rules andswer a large amount of the questions asked by fellow staff and residents. Let's dive in!

Across all of Australia, local government "rates" means different things depending on the context of the conversation. One of those amazing skills developed by Rates Officers is the "ear" - when you hear "rates" in a sentence, is the meaning "pure rates" or "rates and charges"? Context is everything! Let's unpack this by looking at the possible rates available to local government across Australia:

There are 4 "types" of rates:

• General Rate - this is the "pure" tax on a property (and yes, rates are a tax). A property can only have one of these - i.e., it is residential or it is commercial. Often ad valorum based (but sometimes flat), the general rates is the unrestricted, undefined tax on a property. By this, we mean that the revenue from this is not tied to an activity or service of council, or the receipt by the property owner of any service at all. Just "pure" tax.
• Special Rate - so Council wants to build a new aquatic centre, serving three towns? It can raise a special rate. While not set in stone, the best rule of thumb is that a "Special Rate" needs to have the following: A) a defined purpose with a defined cost; B) a defined set of property owners who will receive it; C) a defined period of time in which the special rate will be in effect...the sum of which (including interest) should not exceed A. Councils should use this when carrying out funding for something extraordinary - and with defined parameters. It is NOT intended for something which becomes a nomral service provided by council. Unfortunately, in common usage, someone might say "hey let's make a special rate for x" when they ACTUALLY mean "let's create a new General Rate for those kind of properties...this is very much not to be confused with a "Special Rate". Beware!
• Service Charge - funds being raised by council intended to offset the delivery of a particular service. There are several ways to view these - a charge on a service which all benefit from, such as libraries, or a waste transfer station - or services which are specifically accessed by a property, such as bin collection. Revenue ought to be tied to delivery of the service. In some states, there is a general "service" charge (such as the "Municipal Charge" in Victoria), but it remains very much a charge. What can a council charge for? There is a huge variety of options, with bin collection and waste management being the most common. There is no restriction on the amount of service charges which can be levied.
• Statutory Charge - over the past twenty years, State Governments have increasingly invoked one of the basic principles of taxation to require councils to collect taxes on behalf of another statutory body. Essentially, the State Government is ill-eqiupped to collect a property-based tax, as it would need to replicate the functions of a local council. Instead, councils collect on its behalf. Common examples are NRM or Fire Services levies, or even Essential Services levies. These are growing over time, and we suspect there will be more of them in the future, which causes a bit of a headache for local governments. There is no restriction on the amount of statutory charges which can be levied.

So, when you look at your next rates notice, each of those line items needs to be one of the four above. We hope this basic primer on rates assists - reach out to your rates officer to learn more!