General Overview of Council Rates
Information on this page courtesy of the Local Government Association.
The wide range of services provided and community infrastructure maintained by your local Council must be paid for. Information on or linked to this page is designed to assist in understanding the role of Council Rates today and how the rating system works. Councils receive some funding in grants from other governments and raise some funds in user fees and charges, however about 68% of their revenue comes from the only tax they are allowed to raise: Council Rates. (Peterborough's rates revenue is 32%, plus 55% from Government grants, and the rest being user charges and commercial activities).
Some of the areas in which Councils spend in a typical year (in no particular order):
- Health Welfare & Safety
- Community Amenity
- Libraries & Culture
- Sport & Recreation
- Housing, Planning & Development
- Economic Development
- Parks & Gardens
- Roads & Bridges
- Waste & Recyling
- Water, Sewer & Drainage
- Enivornmental Services
Council Rates are based on simple principles, have low administrative costs and are the subject of virtually no evasion or avoidance, so people who do the right thing are not subsidising tax avoiders - however understanding how the general system and various options available to Councils impact on individual ratepayers can be complex. This information seeks to outline those complexities to promote better understanding of the rating system. It is important however that you read the information on your rates notice, talk to your own Council directly and that you are aware that if rates are not paid by the due date then late payment fees may be applied.
In 2005 the LGA commissioned an independent inquiry into the financial sustainability of Local Government in SA to clarify the financial pressures on Councils and their use of rates and other income sources.
Several Fact Sheets can be viewed at the following link: http://www.lga.sa.gov.au/page.aspx?u=326
The 68 Councils in South Australia must operate within the legal framework provided by an Act of the SA Parliament: The Local Government Act 1999 - and a number of other Acts which provide powers or place legal responsibilities on Councils (such as the Development Act, the Libraries Act and the Public & Environmental Health Act). Combined, SA Councils spend more than $1.7 billion a year providing a range of essential services and maintaining nearly $18 billion worth of local community infrastructure (roads, drains, buildings) which is used every day of the year.
It is also important to understand that a common myth about Council rates - that Councils get "windfall" gains from growth in property valuations - is exactly that, a myth. Because Councils must re-set tax rates (rates in the dollar) each year to align with their budget requirements they have steadily reduced tax rates across the State to avoid "windfall" gains.
The following provides an overview of Council rates "at a glance."
Council rates are governed by the Local Government Act 1999 - (see Chapter 10 Rates and Charges) which can be found on the SE Legislation website: http://www.legislation.sa.gov.au/LZ/C/A/LOCAL%20GOVERNMENT%20ACT%201999.aspx.
Council rates are the single biggest source of revenue for councils. Each financial year a council must adopt a budget and then set the rates according to the revenue needed. Every council must prepare a rating policy each year and forward a summary of this to each ratepayer.
Councils have a variety of rating options available and need to determine what is the best method to use for the local community. Rating options include having a general or single rate apply to all properties, having a different rate according to property uses/location, having a separate rate for a particular purpose in part of a council area, having a service rate or charge for a specific service like septic tank effluent disposal and having a fixed (flat) charge as part of the general/single rate.
Property values are used as a basis for determining what share of the total rate revenue individual ratepayers are to pay.
Councils may use site value (land only), capital value (land plus improvements) or annual value (rental) - the majority use capital value. Councils can use valuations provided by the Valuer-General or a valuer authorised under the Land Valuers Act 1994 engaged by the council.
Ratepayers may object to valuations if they consider them to be inaccurate. For more information refer to Fact Sheet 4 (above right).
To achieve a balanced budget, each Council must determine every year what the rate in the dollar needs to be in order to generate the required rate revenue.
In simple terms, the amount of rates payable is determined by multiplying the property value by a rate in the dollar that is determined by the Council e.g. if the property value is $200,000 and the rate in the dollar is 0.004200 the rates payable will be $840. (Note: As indicated above, this will vary according to the rating method used by each Council).
Each ratepayer must be given the opportunity to pay their rates in quarterly installments.
Councils can provide rate relief to certain ratepayers in specific circumstances such as financial hardship (enquiries of this type need to be made to your Council, and are confidential).
Councils are under particular pressure due to growing community demands, higher standards, a large amount of deteriorating infrastructure built in the 1960s and 1970s and "cost shifting" by other Governments.
National information on the pressures on Councils can be found in a report from a Commonwealth House of Representatives Inquiry into Cost Shifting: "Rates and Taxes : A fair share for responsible Local Government." Information on this report can be found by clicking here: http://www.lga.sa.gov.au/page.aspx?u=388