Rates are a property tax based on property valuations, which are determined by the council.
Rates represent 3.5 per cent of the overall taxation collected in Australia.
A council begins its rate process each year by determining any municipal and garbage (service) charges that may be needed to recover part of its administrative cost and the cost of providing waste collection and disposal services respectively.
Once these discretionary charges have been accounted for, a council determines the rate in the dollar by dividing the balance of the required budget revenue by the total value of all rateable properties in the municipality.
The rate in the dollar is then multiplied by the value of a property — using one of three valuation bases — to establish the amount to be paid by each property owner. This amount is known as the general rates.
General rates are added to any municipal and garbage charges set by a council to determine the total rates payable on a property.
Rising property values usually result in the adjustment by council of a lower rate in the dollar to offset the overall increase in property values.
Councils don't collect extra rate revenue as a result of a revaluation.
Each year, we undertake a survey of predicted rate increases for all Victorian councils.
This survey provides 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.
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 valuation. In the first instance, the ratepayer should approach the council valuation department.