Rates notices have arrived in mail boxes over the last three weeks and for some people, there has been a substantial jump.
Every year property owners raise concerns about why their rates have increased beyond the rate cap. Concerns this year have been exacerbated by other cost of living increases and increases in interest rates.
Many property owners do not understand how rates are calculated and their rates can be difficulty to understand.
Rates are a type of property tax, levelled each year on all property owners to pay for council facilities and services whether or not a property owner uses them. These include road maintenance, libraries, school crossings, child care and kindergartens, new footpaths and sporting and recreation facilities.
Rates are a fundamental income source for Council. In 2022/23 rates and charges account for 50% of Council revenue. Government grants account for a further 42% or Council revenue. Council has very little control over either of these funding sources.
The State Government sets a rate cap which determines how much the total increase to Council rates revenue can be. This year the rates cap was 1.75%. In simple terms, this means Council can only increase in its total rates revenue by 1.75%. The rates cap does not apply to individual properties, only to the total pool of rates received across all rateable properties in the Shire.
Rates are calculated according to the category of property (residential, commercial, industrial or farming land) and the value of the property (land value and buildings, together known as the Capital Improved Value or CIV). The CIV is independently assessed by the Valuer General of Victoria, not by Council, and is based on recent sales of similar properties.
In Hepburn Shire farming land is rated at a substantially discounted rate compared with residential properties (65% of the residential rate) and commercial properties (including short term accommodation rentals) and industrial properties are rated at a substantially higher rate (118% of the residential rate). Council decided earlier this year to make no further changes to these differentials.
The change in valuations of your property compared to the average valuation change and the 1.75% rate cap means that the rates for some properties increase by more than the rate cap and rates for other properties go down.
Two real life Daylesford township illustrate how this can happen.
Property A, with a CIV of $404,000 in 2021 had rates of $1,991.88. In 2022, the CIV increased to $590,000 and rates increased to $2,201.34, a increase of 10.5%. Property B, with a CIV of $850,000 in 2021, was assessed rates of $3,528.90. In 2022, the CIV increased to $870,000 but rates decreased to $3278, a decrease of 7.1%.
Because the increase in CIV of Property B was proportionally smaller than that of Property A, it formed a smaller portion of the total pool of rateable properties and so rates for the property decreased despite the 1.75% increase in the total rates income for the Shire.
This will be occurring throughout the Shire. The rates for some properties will have increased reflecting the Valuer General’s assessment and some will have decreased. Not surprisingly, those whose rates have increased may be annoyed, and those whose rates have decreased will be relieved but also concerned that the value of their properties has not increased to the same degree as their neighbours. And those with rate increases might complain loudly while those who have had rate decreases might not advertise the fact.
Other items in the rates notice include waste charges and the Fire Services Levy. The Waste Charge is not capped by the rate cap but income can only be used to provide waste services. The Fire Services Levy is collected by Councils but goes directly to the State Government to fund emergency services. The fire Services Levy is set by the State Government and is not capped.
The Council website https://www.hepburn.vic.gov.au/Residents/Rates-and-property provides details on how to write a written objection to the Valuer General if you believe your valuation is incorrect. The website also provides detail if you are experiencing financial hardship on how to request a payment plan and also on rate concessions for pensioners.
Lesley Hewitt is a Councillor for Birch Ward.