Each council collects rates from residents and businesses in its municipality to help fund local infrastructure and services. Councils use property values as the basis for distributing the rating burden across the municipality.
Calculating how much each property owner pays in rates involves determining the total amount of rate revenue required and dividing this across the total value of all rateable properties to establish a rate in the dollar.
The rate in the dollar is then applied against each individual property value to calculate how much each property owner pays. Rates usually make up about half of a council’s income, and they are a form of property tax.
The Victorian legislation that enables councils to levy rates and charges is the Local Government Act 1989.
Each council's Financial Performance can be viewed and compared in the Compare Councils section of this site. To do this, click on the service area icon, select your council from the filter, then use the checkbox to select three additional similar councils for comparison from the list.
Rates are levied annually. They must be paid in four instalments, or as a lump sum if allowed by the council. Due dates for instalment payments are the last day in September, November, February and May. Where lump sum payments are allowed, they are due by 15 February. Councils include this detail and payment options on their rates notices.
Sometimes a council may offer incentives to their ratepayers to pay before the due date. These must be detailed on the rate notice.
Unpaid rates remain a debt on the property, regardless of any change of ownership. If rates or charges remain overdue for more than three years without an arrangement made with the council, the council may obtain a court order enabling it to sell, or assume ownership, of the land to recover the debt.
If you are issued with a rate notice you should make sure you give it prompt attention. Councils charge penalty interest on unpaid rates and charges. These are calculated from the date that the rates were due.
The penalty interest rate is fixed under the Penalty Interest Rates Act 1983.
Councils can choose to defer or waive all or part of unpaid rates in cases of genuine financial hardship. Councils usually have a policy on when a waiver may apply.
You may apply to the council for a waiver or deferral if you will suffer such hardship through paying your rates. Consult your council in advance of making an application to find out about their policy.
The council might also waive part of your rates if you are concession cardholder. The minimum amount of the waiver is set by the state government and indexed. However, individual councils may decide to increase the amount waived in some instances. To find out more about municipal rate concessions, contact the Concessions Information Line on 1800 658 521.
Councils are also able to grant a rebate or concession on rates and charges to assist ‘proper’ development and the preservation of buildings or places of historical, environmental, architectural or scientific importance within the municipality. ‘Proper’ development can cover land use, economic development and environmental objectives.
A council resolution that grants such a rebate or concession must demonstrate how the whole community will benefit as a result.
A council prepares a budget for the coming year before deciding how much it should raise in general rates. The budget considers community needs in relation to the available council income. A council will also consider how rate rises will impact ratepayers.
In broad terms, the total amount of money to be raised in general rates is divided by the total value of all rateable properties. The resulting figure is called ‘the rate in the dollar’.
The council determines the amount to be paid in rates by applying the rate in the dollar to the assessed value of each property. For example:
If council plans to raise the total rate revenue of $10 million, and the total Capital Improved Value of all rateable properties in the municipality is $2,380 billion, then the rate in the dollar is calculated by dividing $10 million by $2,380 billion = 0.0042 cents in the dollar.
A property’s rates are calculated by multiplying the valuation of the property by the rate in the dollar. For example, if the Capital Improved Value of a property is $250,000 and the council rate in the dollar is set at 0.0042 cents, the rate bill would be $1050 ($250,000 x 0.0042).
Your rate notice will provide specific details on how your rates are calculated.
Property values are determined by independent professional valuers who are appointed by a council or by the State Valuer General. These valuers assess the market value of each property in line with guidelines laid down by the State Valuer General. State legislation requires that all properties be revalued every two years.
Property values vary across a municipality and over time. These are reflected in each property’s rate bill. Your property’s valuation will directly affect your rates. If your valuation increases, your rates will generally be higher.
Councils do not collect extra revenue as a result of changes in property valuations. Valuations are simply used to help calculate the rates payable for each individual property. Information about your property’s value is included on the rate notice issued by the council.
Valuers must assess the value of a property in three ways:
Most Victorian councils use the Capital Improved Value to levy rates.
You can object to a valuation if you believe it’s inaccurate or unreasonable. Details of how to object are usually included on the rates notice.
Differential rates are where councils set different rates in the dollar for different categories of rateable land. Councils are able to levy either a uniform rate across all properties, or one or more differential rates. The council may, for example, have differential rates for farmland, various categories of residential property or commercial/industrial properties – each paying a higher or lower rate in the dollar.
Differential rates are usually used to achieve greater equity or efficiency.
The highest differential rate cannot be more than four times the lowest differential rate declared by a council.
Councils may charge a service rate or annual service charge for certain services they supply. Most councils today only charge for garbage collection, recycling and disposal.
A service charge is the most common way that councils charge for services, although some may charge a service rate based on the property valuation.
The charge commonly appears as a separate amount on the rate assessment notice. A different amount may be charged for different property categories or for different size bins for waste purposes.
A municipal charge is a flat charge that can be used to offset some of the council’s administrative costs. The total amount raised from a municipal charge cannot be more than 20% of the total raised from the combination of municipal charge and general rates.
Applying a fixed municipal charge may be a way of ensuring that all properties make a standard contribution towards a council’s administrative costs. Some councils nominate which costs will be paid for by the fixed municipal charge.
Sometimes a council will levy special rates or special charges. These are different from general rates and charges because they are levied for particular works or services and they are levied on a limited number of ratepayers.
Councils are able to levy a special rate, a special charge, or a combination of these to help pay for any council service or activity that will be of special benefit to a particular group of property owners.
Common examples of special rates or charges include schemes for constructing footpaths, roads, kerbs and channels or drains. They may cover the provision of services like promotion, marketing or economic development (for example, for commercial businesses).
A council may set a special rate or charge for almost any type of activity that the council undertakes. Councils must comply with the provisions of the Local Government Act when setting special rates or charges. Special rates and charges must be levied in proportion to the special benefits to which they relate. Before a council proposes a special rate or charge, it must estimate the proportion of the benefits of the proposed works or services that will be of benefit to the people who are liable to pay.
For example, before a council proposes a special charge for a road construction scheme it will calculate what share of the benefits of the road construction will provide for the adjoining properties (improved drainage, reduced dust, better access, and so on) compared with general benefits to other people (for example, other drivers using the road). The council will limit the total proportion of costs to be paid by all the property owners to their combined share of the benefits.
The council will also set criteria to determine how the rate or charge will be apportioned between the affected ratepayers. Understanding the way a special rate or special charge is apportioned can be complicated. Contact your council for more details.
A council may vary a special rate or special charge it has imposed. This variation may relate to the amount to be paid, the people liable or the land affected.
If a variation to a special rate or charge means that people not previously liable now have to pay, or if there is a difference in the amounts to be paid, the council must advertise the variation and people may lodge submissions under section 223 of the Local Government Act.
By law, before finalising a special rate or charge, the council must undertake formal public consultation. Councils will often ask the community for comment before proposing the rate or charge, although this is not mandatory.
People have the right to put in a formal submission before the council finalises a special rate or charge. The council is required to consider all submissions that are received within 28 days of the public notice, although councils may allow a longer time for submissions.
If the council is proposing to raise more than two-thirds of the total cost of a project as a special rate or charge, the affected ratepayers must also be given a formal right to object. If objections are received from a majority of properties within 28 days, the council cannot approve the special rate or charge. This objection process does not apply to drainage schemes that are required for public health.
Under certain conditions, people who are required to pay a special rate or special charge may appeal to the Victorian Civil Administrative Tribunal (VCAT).
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