Hepburn Shire’s outstanding rates and charges reached $5.7 million at 30 June 2026, about 20 per cent of council’s annual rate income. Arrears grew by $670,000 during 2025/26 alone. Unpaid rates have gone up five fold over the past decade. It’s one of the main reasons Council finances are in trouble.
Council officers point to two causes: cost-of-living pressure on households and council’s decision not to take anyone to court over unpaid rates, even when other attempts to get payment had failed.
According to the first stage of an independent review of Hepburn Shire’s Long Term Financial Plan tabled at this weeks council meeting Hepburn Shire Council is under “a fair amount of financial pressure” but is far from the worst-placed small rural council in Victoria.
The review, by Mick Jaensch of Mik2 Consulting Services, was commissioned as a major initiative of the 2026/27 Budget. It benchmarks Hepburn against similar small rural councils and assesses the Shire’s current financial health using draft 2025/26 results, which were still being finalised when the review was written.
Slightly below average, not at the bottom
The review places Hepburn “slightly below average” across many indicators in the small rural council group, but well clear of the councils in the most difficult positions.
It identifies five key weaknesses:
- high outstanding rate debts
- low cash levels
- below-average spending on renewing and upgrading assets such as roads, buildings and drainage
- low revenue from fees and grants
- an operating surplus below the group average.
The reviewer places Hepburn within a broader trend. Most Victorian councils are now under financial strain or face declining ten-year outlooks, as recent parliamentary inquiries and Victorian Auditor-General audits have shown. Council’s officers say there is “no relief on the horizon,” with the State Government pushing further changes that could hurt council finances.
The review acknowledges council’s efforts to date, including cutting net operating costs and increasing the rate base in 2025/26. Even so, it finds the Shire remains under pressure.
A $2.5–3 million annual gap
The Council can meet its bills, but its underlying operating result, which strips out one-off items like capital grants, is forecast to stay in deficit by between $2.5 million and $3 million a year. This is primarily because assets are depreciating faster than it can build up capital to replace them and Hepburn has a significant asset base for the size of the population.
Part of the problem is that the State Government has capped rates making it difficult for Hepburn to keep up with increased costs, and the Commonwealth Financial Assistance Grants to Local Government have been allowed to decline as a proportion of Commonwealth revenue.
The reviewer argues that managing council’s accumulated financial position should take priority over the underlying deficit. But ratepayers may want to ask how long a council can run a structural deficit of this size before it erodes that accumulated position.
How big is the hole?
The review uses two methods to measure council’s overall position. A “pure cash” approach compares cash on hand with commitments. A balance-sheet approach, which the reviewer prefers, asks whether all of council’s current assets, including money owed to it, cover its liabilities and reserve funds.
On the balance-sheet measure, council had a deficit of $1.3 million at 30 June 2026. The review calls this “a much more moderate” result and a more accurate picture of council’s true position.
The difference matters. The balance-sheet method counts unpaid rates as an asset. Council has the money on paper but not in the bank. The review acknowledges this, noting that council will stay short of cash until it deals with its outstanding rate debts.
Millions owed
Millions are owed to Council in outstanding rates. Mayor, Cr Tony Clark, said:
“Of Council’s approximately 8,000 residential ratepayers, about 1,000 have overdue rates, yet only 200 are currently on payment plans. We are keen to help anyone having difficulty, so please reach out and contact us to discuss how we can help through developing payment plans.”
“We are not alone in this situation of feeling significant financial pressure, it is being felt right across the local government sector. It’s not just pressure due to inflation and the rising cost of providing essential infrastructure and services, there is cost shifting from other levels of government. With a low rate base, four major townships to service, a large geographical area and few opportunities to generate additional income, achieving long-term financial sustainability is a challenge,” he said.
Vacant land makes up a higher share of properties in arrears than its share of the overall property base.
Under Victorian law, council cannot take court action over unpaid rates until at least 24 months after it has notified the ratepayer in writing and advised them of payment options such as deferrals and payment plans. Council only amended its rate notice to meet this requirement in August 2025. That means court action is unlikely before late 2027 for most debts. If rates go unpaid for three years with no arrangement in place, councils can seek court approval to sell the property.
The CollectAU letters
Many ratepayers will remember the final reminder notices sent out before the end of the financial year. Council used debt collection firm CollectAU to send them, and the letters went out on CollectAU letterhead.
The notices brought in an extra $2 million. But council now concedes they caused community concern because people read them as debt-collection demands that could affect their credit rating. Future notices will go out on council letterhead.
In 2025/26, council sent 2,984 final reminder notices and referred 740 ratepayers to the debt collection agency, up from 464 the year before. No solicitor’s demand letters were issued, compared with 211 in 2024/25.
What happens next
The officers recommended that council:
- work with ratepayers “through a respectful approach” that supports those in financial hardship with payment plans and tailored help
- bring forward a review of its Revenue Collection and Financial Hardship Policy, last updated in May 2021, to the November meeting, informed by community input and aligned with new Ministerial Guidelines issued in December 2025
- consider writing to mortgage lenders to request payment when an owner ignores a solicitor’s demand
- in future, begin court action against properties that have received the required 24 months’ notice.
The second stage of the independent review will be completed later this year. It will examine how council should use its main financial levers, such as rates, fees, spending and borrowing, in its next Long Term Financial Plan, due alongside the 2027/28 Budget.
The comparative health check will be updated in November, once other councils’ 2025/26 results are available.
