How Council Rates Are Calculated
Council rates are a form of property tax levied by local government authorities to fund community infrastructure and services. Unlike income tax, council rates are calculated based on the assessed value of your property.
The general formula used by most councils is:
(Property Value × Rate in the Dollar) + Fixed Charges – Rebates = Total Rates
1. Property Valuation
Councils typically use one of three valuation methods to determine the taxable value of your property:
- Capital Improved Value (CIV): The total market value of the land plus buildings and other improvements. This is the most common method.
- Site Value (SV): The value of the land only, excluding any buildings or improvements.
- Net Annual Value (NAV): The estimated annual rental value of the property (often used for commercial properties).
2. The "Rate in the Dollar"
This is a multiplier set annually by the council during their budget process. It is calculated by dividing the total revenue the council needs to collect by the total value of all rateable properties in the municipality. For example, if your property is valued at $600,000 and the rate in the dollar is 0.0025, your base rates would be $1,500.
3. Fixed Charges and Levies
In addition to the variable rate based on value, most rate notices include fixed charges. Common examples include:
- Waste Management Charge: Covers kerbside bin collection, recycling, and street cleaning.
- Municipal Charge: A flat administrative fee applied to all properties to cover governance costs.
- State Levies: Often collected by the council on behalf of the state government (e.g., Fire Services Levy).
Understanding Valuation Changes
If your property value increases, your rates do not necessarily increase by the same percentage. Councils operate on a "revenue neutral" basis regarding valuations. If all property values in an area rise by 10%, the council typically lowers the "Rate in the Dollar" to ensure they only collect the budgeted revenue amount. Your rates generally only increase significantly if your property value increases more than the average increase across the municipality.
Frequency of Payments
Most councils offer flexibility in payment frequency. While the calculation above provides an annual total, you can typically pay:
- Annually: Paying the full lump sum by a specific date (usually early in the financial year).
- Quarterly: Breaking the total into four equal installments.
- Monthly: Usually set up via direct debit (10 or 12 installments).