Council Rating

Display image of cartoon showing what rates can be used for

Throughout Australia the main form of revenue that councils raise is rates, a system of property taxation generally based on the value of land.

Common principles apply to, and underpin, the imposition of any system of taxation on communities, including council rates. These principles relate to concepts of equity, benefit to the community, capacity of ratepayers to pay, the efficiency of the impact of the taxes, and the simplicity of the taxation system. Read more about the principles of taxation.

Each council in South Australia has unique local economic, geographic and social characteristics, and as a consequence has:

A different tax base in terms of the number of rateable properties, total property value, the range of values, and the distribution of values within that range; and
Different rate revenue needs which are related to its objectives and resulting expenditure needs, and different amounts of revenue it can obtain from sources other than rates, such as grants and fees and charges.
Different amounts of revenue it can obtain from sources other than rates, such as grants and fees and charges.

A number of rating options for councils are set out in the Local Government Act 1999. These options allow each council to raise funds to :

Meet its service and strategic objectives
Fulfil regulatory functions; and
Meet local perceptions of fairness and equity

Most land within a councils is rateable except Council land and Crown land. Land used for certain public and community services, though classified as rateable, is entitled to the benefit of rate rebates of up to 100% under specific provisions of the Local Government Act (ss160-165).

Rates are a charge against the land (s177). The owner of the land (unless the Council is advised otherwise) is the principal ratepayer and rates may be recovered as a debt against the principal ratepayer. In certain cases the occupier of the land may be classed as the principal ratepayer.

Frequently asked questions about council rates and rating:

1. What are the principles of taxation?

The generally accepted principles that apply to any system of taxation are:

Equity - the principle that taxpayers of similar financial means should pay similar amounts of tax, and taxpayers of greater financial means than others should pay a proportionately greater amount of tax.
Benefit - the concept that there should be some relationship between the tax paid and the benefits received.
Capacity to pay - requires that some consideration be given to the ability of the taxpayer to pay the tax because no single measure of financial means can provide an absolutely reliable guide to the circumstances of individual taxpayers.
Efficiency - i.e. does the tax produce desired results (if any). If the tax is being imposed to raise revenue without changing taxpayers’ economic behaviour but it has this effect then the tax is inefficient.
Simplicity - refers to the extent to which the tax is readily understood and accepted, its certainty of application, and its ease of collection.

To some extent these principles conflict with each other in practice, and governments, including councils, must balance the application of the principles, the policy objectives of taxation, the need to raise revenue through tax, and the effects of the tax on the community.

Top

2. What basis for property valuations can councils use for rating purposes?

Councils have the choice of three types of values as their valuation base for the purposes of rating under the Local Government Act 1999 (s151):

Capital value – the value of the land including improvements
Site value – the value of the land without structural improvements
Annual value – a valuation related to the rental potential of the property.
(Detailed definitions are contained in the Valuation of Land Act 1971)

Most councils use the capital value basis of valuation. Under section 167, a council may choose to use property valuations:

Supplied by the Valuer-General; or
Made by a qualified valuer (or firm or consortium of valuers) employed or engaged by the council; or
Sourced from a combination of both the Valuer General and council employed valuer, but all valuations for land within a particular land use category which a council uses as a basis for differential rating (for example, residential use) must come from the same source, either the Valuer-General or the council’s valuer.

Almost all councils use valuations supplied by the Valuer-General.

Almost all council use a valuations supplied by the Valuer-General. If councils use a combination of the Valuer-General's and their own valuations, the Valuer-General can gazette guidelines, policies or standards with which valuations must be consistent. This is designed to ensure that valuers producing valuations for the Valuer-General and any private valuers producing valuations for the same council are following consistent methods.

Top

3. What can I do if I disagree with the valuation of my property?

First, ascertain whether your land has been valued by the Valuer-General (as most land is) or someone else. Part 4 of the Valuation of Land Act 1971 provides that if you are dissatisfied with the Valuer-General’s valuation of your property you may object within 60 days of receiving the first rates notice for the financial year.

Councils are required to include on their rate notice a brief description of the processes that apply to object to the valuation, which generally will be a referral to the Office of the Valuer-General.

The Valuer-General must consider the objection and advise the outcome in writing.

There is an equivalent procedure for objecting to the Council if the Council has made the valuation (s169).

If you are still dissatisfied, in the case of the Valuer-General’s valuations, there is an additional option of a formal review by a member of an independent panel of valuers established under the Valuation of Land Act.

Whether the Valuer-General or a council valuer made the valuation you may appeal to the Land and Valuation Court.

If an objection or appeal results in the alteration of a valuation, an adjustment must be made to the council rates. Any amount overpaid must be refunded or, if the council so determines, credited against future liabilities for rates on that land. Interest is payable on an amount so refunded or credited.

Top

4. What types of rating structures can councils use?

General rates

The largest component of the charges on your rates notice is general rates.

General rates are based on property value. The council will set a “rate in the dollar” which is then applied to your land to calculate the amount of general rates for the year. The phrase “rate in the dollar” means a percentage of the property value. In a simple council rating policy, the council would apply the same rate in the dollar to all land. However, many councils, mindful of balancing the principles of taxation, choose to make some variation to this basic strategy. The options for variation may include one or more of the following:

1. Differential Rates

Councils may choose to apply different rates in the dollar for:
(a) Different land uses within their area, or for
(b) Different localities within the area, or for
(c) A combination of both locality and land use, as follows.

a) Land uses

There are nine different land uses that councils can differentiate between. They are:

Residential
Commercial - shop
Commercial - office
Commercial - other
Industry - light
Industry - other
Primary production
Vacant
Other

The definition of each category is set out in detail in the Local Government (General) Regulations 1999 (at regulation 10).

b) Locality

Locality means either a zone (defined in the Council’s Development Plan) or whether land is inside or outside a particular named township, or both. For example, a council might set one differential rate for all land in a (named) town, a second differential rate for all land in a second (named) town, and a third differential rate for all other land. Alternatively a council might set one differential rate for a Town Centre zone, a second differential rate for land in a Flood Plain zone; and a third differential rate for all other land.

c) Combination of land use and locality

For example, a council might declare one rate for all residential land inside a (named) town, another differential rate for all residential land outside any town, a third differential rate for commercial land in its Town Centre zone, a fourth differential rate for industrial land inside towns, a fifth differential rate for industrial land outside towns, and so on.

2. Fixed charges

Many councils include, in their general rate, a component called a “fixed charge.” The fixed charge is a set amount levied against all properties irrespective of their value.

For example:
Property value = $250 000
Rate in the dollar = 0.003 (often expressed as 0.3 cents in the dollar)
Property valuation component ($250 000 x 0.003) = $750
Fixed charge = $250
Total rates: $750 + $250 = $1,000

Using a fixed charge reduces the effect of the property valuation component of the general rate. In other words, it changes the distribution of the total rate burden to reduce some of the difference between what would be paid by the owners of low-value land and the owners of high-value land. The higher a council’s fixed charge component, the less difference there is between property owners. From 1 July 2007, no council is permitted to base their general rates entirely on a fixed charge as this would be contrary to the taxation principles of equity and capacity to pay.

3. Minimum rates

Councils not using a fixed charge may set a minimum amount payable, as an alternative. This has a similar effect to a fixed charge, in that lower valued properties subject to a minimum rate, must pay more than the rate in the dollar that applies to their land. For example, if a council declared a minimum rate of $600, but the rate in the dollar for a low-value property is calculated to produce a rate of $560, the landowner must pay the higher, minimum amount:

Minimum amount: $600
Property value: $140 000
Rate in the dollar: 0.004
Rates to be paid: $140 000 x .004 = $560.

A minimum amount may only be imposed against the whole of an allotment (which can include land under a separate lease or licence) and only one minimum amount is payable by two or more pieces of contiguous (adjoining) land owned by the same owner and occupied by the same owner. A minimum amount must not be applied to supported accommodation or independent living units within the same group or complex of units. A minimum amount must not apply to more than 35% of the properties in a Council area (s158).

4. Adjustments for specified values

Councils may also alter the amount payable for properties that fall within a defined range of valuations. In practice this option is used by councils where:

A small number of highly valued properties lie within an area otherwise characterised by lesser valued properties, and
Council fixes a relatively high rate in the dollar that produces an average rate from the majority of low-valued properties, but an exceptionally high amount from the few high-value properties. In these circumstances, an adjustment for specified values would operate in effect, like a cap or limit on the maximum that would otherwise be payable.

Adjusted rates are often used in combination with minimum rates, so that a council has, in effect, both a maximum and a minimum rate. However section 158 of the Local Government Act prohibits either or both of these mechanisms being used to affect any more than 35% of properties in a council area.

In addition to 'general rates', your rates notice might also refer to:

A separate rate
A service rate
An annual service charge
An NRM levy

Separate Rates

Under section 154, a council may charge a separate rate on a part of its area to fund a specific activity that benefits only that defined area. For example, a separate rate might be declared to fund:

Undergrounding the power lines in a defined area
Increased parking spaces in a commercial district.

In these circumstances the rates notice for the affected ratepayers sets out the purpose of the separate rate, the basis on which it is set, how long the rate will apply for, and the amount payable. The rates raised for this particular purpose are set aside for the project and must be refunded or offset against other rates payable if the council decides not to proceed with the project or has surplus funds at the end of the project.

Service Rates and Service Charges

Under section 155, councils can impose a service rate and/or an annual service charge for:

The collection, treatment or disposal of waste (including waste water)
The treatment or provision of water
A television transmission (or retransmission) service.

The difference between a service rate and an annual service charge is that:

A service rate, like a general rate, can be levied only against rateable properties, and may be calculated by reference to the value of the property. It may be structured in the same way as a general rate (including differential rates).
An annual service charge may be charged even to non-rateable land, and land that has the benefit of a full rate rebate. It may vary according to:
- The nature of the service, or
- The level of usage of the service, or
- Land use category
- Some combination of the above
- But not by the value of the land.

The revenue collected from the service rate or service charge cannot exceed the total cost to council of establishing, operating, maintaining improving and replacing) including by future capital works) the service. Read more about General Rates. A service charge can be based on the nature of the service, or the level of usage, or a combination of both.

Regional Natural Resources Management (NRM) Levy

Section 95 of the Natural Resources Management Act 2004 requires each council to levy all rateable land an additional sum to fund the council’s contribution to its regional NRM Board.

Regional NRM Boards have taken over the functions that in past years were carried out by:

Catchment Water Management Boards
Soil Conservation Boards
Animal and Plant Control Boards

The levies collected by councils are used by NRM Boards for the purposes of natural resource management. This includes protecting water catchments, controlling animal and plant pests, etc.

The levy may be based on:

(i) the value of rateable land; or
(ii) a fixed charge of the same amount on all rateable land; or
(iii) a fixed charge of an amount that depends on the purpose for which rateable land is used; or
(iv) the area of rateable land; or
(v) the purpose for which rateable land is used and the area of the land; or
(vi) the location of rateable land.

Top

5. How can I find out about my council’s rating structure?

The first thing to do is to contact your council and ask for information about their rating structure.

The responsibility for decisions about the amount and distribution of the rate burden rests with councils, and the Local Government Act requires these decisions to be clearly explained and justified locally, thereby supporting councils’ accountability to their communities.

Councils are expected to prepare and provide comprehensive information to their local communities about the composition and impact of their rating structure through an annual business plan. A summary of this information must be included with annual rates notices.

The business plan must address a number of matters including:

The council's rates structure and policies for the financial year;
An assessment of the impact of the rates structure and policies on the community based on modelling that has been undertaken or obtained by the council;
The reason why the council has adopted its valuation method for rating purposes;
If differential rates are used, the reasons and justifications for the differentiation, and the expected level of revenue to be raised by each differential rate;
If applicable, the use and level of a fixed charge component of a general rate;
The use and level of any separate rate, service rate or service charge, including the reasons for the rate or charge;
The council's policy on discretionary rebates and remissions, with particular reference to the rebates that will apply for more than one financial year and including information on how a rebate is designed to meet the purpose behind the rebate;
Issues concerning equity within the community and the impact of rates across the area; and
The application or operation of a minimum amount payable by way of rates (if applicable).

Top

6. Can my councils change its valuation base or rating structure?

A council may change the basis of valuation or their rating structure, or introduce a new separate or service rate or service charge, but must first consult its ratepayers and clearly explain the rationale and effects of the proposed changes.

In summary, councils are required to:

Publish a notice in a newspaper describing the proposed change, inviting written submissions (within 21 days) and inviting interested people to attend a public meeting (as least 21 days later);
Prepare a comprehensive report on the effects of any proposed changes; and
Hold the notified public meeting prior to deciding whether or not to proceed with the proposal, and make the report available at least 7 days before.

Top

7. How do councils work out their rate revenue?

Councils manage many missions of dollars worth of community assets in the form of roads, bridges, drains, community halls, parks and so on. Maintaining these assets so that they can continue to meet the community need's is only one of the many services that each council provides for its local community.

Different local areas have different priorities and each council has responsibility for weighing up and making decisions about local service needs. For example, tpical decisions made by all councils , every year, include how much should be spent on child immunisation, food safety inspections etc, and how much on repairing and resurfacing roads and footpaths. These types of decisions are made bearing in mind community expectations and the capacity of landowners to pay rates.

Each year, a council must prepare a draft annual business plan and consult with its community on the draft plan. Consultation is very important because a council has the power to raise whatever revenue it requires to carry out its annual business plan.

When preparing its draft annual business plan and budget, a council must also have regard to its annual community consultation and and also its:

Long term strategic management plan - This plan contains strategic objectives for the area that have been the subject of community input through strategic planning processes.
Long term financial plan - Estimates what movements in revenue and expenditure can be expected over a five to ten year period, including information such as the population, age range and other relevant features of the area.
Long term asset management plan - Provides a timetable for maintenance and eventual replacement of major assets including roads, bridges, drains, public halls etc.

These plans are needed to ensure that council assets and services are maintained sustainably over the long term.

Finally, before setting rates for the year a council must first adopt a budget and the property valuations that are to apply for the financial year. These are usually the valuations made by the Valuer-General immediately before each financial year. Read more about the bases for property valuation

Top

8. Can my councils reduce my rates or offer a concession?

The council’s rating structure sets framework for distribution of rates liability among the owners of rateable land. Within the rating structure your council may use differential rates, minimum rates, adjustments for specified values; a fixed charge or to to affect the impact of rates on various classes and categories of property. A Council can also exercise its powers to rebate, remit or defer rates in ways that may affect groups of properties or individual properties.

Rebates

Compulsory

Sections 160 to 165 of the Local Government Act 1999 provide that some types of land must have rates rebated, in part or in full. Thes include:

Health Services under the SA Health Commission Act 100%
Churches & religious purposes 100%
Public Cemeteries 100%
Royal Zoological Society of SA 100%
Government schools on leased land - at least 75%
Registered non-government schools - at least 75%
University affiliated student colleges - at least 75%
Not-for-Profit Community Services - at least 75%
(These include emergency or supported accommodation;
food, clothing or legal services for disadvantaged
persons; essential services or employment support
for persons with disabilities; drug rehabilitation services;
research or education on diseases or illnesses; palliative care (s161).

Discretionary

Under Section 166, Councils have discretion to increase statutory rebates to 100% and have discretion to apply other rebates to:

Secure the proper development of the area or a part of the area;
Support a business in its area;
Preserve buildings or places of historic significance;
Assist an organisation providing a benefit or service to the local community;
Common property under a community title which is available for public use.

Discretionary rebates may also be given on land used for:

Educational purposes;
Agricultural, horticultural or floricultural exhibitions;
A hospital or health centre;
Facilities or services for children or young persons;
Accommodation for the aged or disabled;
An approved residential aged care facility;
A day therapy centre.

A Council’s power to grant discretionary rebates of rates also include rebates to provide relief against what would otherwise amount to a substantial change in the rates payable by a ratepayer due to:

A change in the basis of valuation used for rating (eg change from site to capital values);
Rapid changes in valuations; or
Phasing in changes to the basis or structure of rates.

Remissions and deferrals

Under Section 182, a council may also remit or postpone the payment of rates, on the application of the ratepayer, if the payment of the rates would impose hardship on the ratepayer (s182). A council may also provide remissions to holders of Commonwealth Concession Cards or State Seniors Cards. Enquiries about council’s discretion in this regard should be made at the respective council office.

Top

9. What options do I have for payment of council rates?

Under Section 181, your council is required to offer the option of quarterly instalments of approximately equal amounts (falling due in September, December, March and June)

The council may agree with an individual ratepayer to accept an alternative payment schedule. It may offer incentives or discounts for early payment but is not required to do so.

If you are having trouble paying your rates, approach the council and ask about relief options they make available.

Councils can choose to provide:

Remission (waiver) of rates for holders of Commonwealth Concession Cards or State Seniors Cards;
A rebate of rates where rapid rises in valuation result in a substantial change in rates payable;
Remission of rates in whole or in part in cases of financial hardship;
Postponement of payment of all or part of the rates (with or without interest) in cases of financial hardship;
Individual agreements with ratepayers about the number of rate instalments and when they fall due.

The State Government funds certain concessions related to council rates:

Concessions for pensioners and self-funded retirees.
Concessions relating to financial hardship in some circumstances.

For further information about these concessions, refer to http://www.revenuesa.sa.gov.au/concessions.html

From 1 July 2007, each council will be required to offer a rates deferral scheme for persons eligible to hold a State Seniors Card.

Top

10. What may happen if I do not pay my rates?

If an instalment of rates is not paid by the due date a council can impose a fine of 2% on the unpaid amount. If the instalment remains unpaid, interest on the outstanding amount may be charged on a monthly basis. Councils have a discretion to reduce or write off fines and interest.

Where rates are not paid for more than 3 years, a council has the power, under Section 184 to sell the land to recover the unpaid rates.

Top