Rates are a property tax based on property valuations, which are determined by each council.
Rates represent 3.6 per cent of the overall taxation collected in Australia.
In 2016, the Victorian Government introduced rate capping to restrict how much councils can raise their rates each year. The Minister set the initial rate cap in 2016 at 2.5 per cent, and in 2017, the Minister reduced the rate cap to 2 per cent.
A council's overall rate revenue must not be more than 2 per cent higher than last year, unless they received an exemption.
The State's independent umpire, the Essential Services Commission, can grant shires an exemption to raise rates above the cap. In 2017, four Victorian councils were granted a rate cap variation.
The rate cap applies to the overall rate revenue collected by each council. It does not apply to each property owner's rates notice.
A council budget determines how much rate revenue will be collected to fund around 100 community services, plus maintain and upgrade local roads and other community infrastructure.
General rates are calculated as follows:
Waste charges and the Victorian Government's fire services property levy are then added to your general rates to determine the total amount you will pay on your rates notice.
The rate cap applies to general rates and municipal charges. It does not apply to waste charges or the State’s fire services property levy.
Councils don't collect extra rate revenue as a result of property revaluations.
For more information, read: Council rates explained.
Rates survey and rates package
Prior to the introduction of rate capping in 2016, we undertook an annual survey of predicted rate increases for all Victorian councils.
This survey provided comparable data on the budgeted movement in local government taxes on a per head and per assessment basis.
In interpreting the data, it is important to note that both per head and per assessment measures should be examined to understand the average rates payable per person of the population and based on the number of properties within a municipality.
See the 2015-16 rates package (Word - 2.36MB) and previous rates packages (dating back to 2003).
Accurate valuations of properties are a critical means of ensuring that property owners pay a fair share of rates.
Each council chooses one of three valuation bases:
- capital improved value (CIV) reflects the value of the land and all fixed improvements, including property
- site value (SV) reflects the value of land only
- net annual value (NAV) reflects the annual rental value of the property net of fixed costs
Most councils use the CIV method.
Every two years council valuers have a statutory requirement to conduct a review of property values based on market movements and recent sales trends.
Council valuers also undertake a physical inspection of a sample of properties.
The total value of property in a municipality is then used as the base against which that council strikes its rate in the dollar. The rate in the dollar is multiplied by the CIV, SV or NAV of the property to determine the general rates due on each property.
The valuer general is responsible for reviewing the accuracy of the total valuation for each municipality before he or she certifies that the valuations are true and correct.
Ratepayers can lodge an objection if they disagree with the property valuation. In the first instance, the ratepayer should approach the council valuation department.