Prepare for massive NSW council rates shake up, says IPART

Perks over? Central Park, Sydney.


NSW apartment owners should pay higher council rates, pensioners should pay back rates concessions and there should be fewer exemptions, the Independent Pricing and Regulatory Tribunal (IPART) has said.

The Tribunal’s draft review of the NSW local government rating system out today (Monday) makes some key recommendations that are likely to give the state’s local councils something to smile about.

IPART has said that the review aims to make rates collection fairer and more efficient, keep services consistent and to make councils more sustainable long term and has insisted that it is not an attempt to increase the overall amount collected through local government rates.

Another objective is to reduce council’s reliance on special rates variations, where they must apply to the Tribunal if they wish to set rates above the agreed rates cap.

The review examines how rates are calculated, what exemptions are allowed and the rating categories used.

Here are the main points of the draft review’s recommendations:

  • Give councils the choice to set the variable component of rates based on the capital improved value (CIV) of land, not its unimproved value (UV). This means apartment owners are likely to pay higher rates where there is usually a high capital value relative to land value
  • Change rate exemptions so they are based on land use, not ownership
  • Dump some rate exemptions where land is used for commercial or residential purposes
  • Replace current pensioner concession scheme with a NSW government-funded rate deferral scheme
  • New rating categories if councils want them, including environmental and vacant land, business and farmland
  • Let councils set different rates for different parts of a local government area, to reflect access and demand for services and the cost of providing them
  • New councils (under mergers) to continue existing rates or set different rates for pre-merger areas once the four-year rate path freeze is over

The NSW ratings system is central to the health of the state’s councils, who have long complained that ratecapping, in place since 1978, combined with cost-shifting and the freezing of Financial Assistance Grants, have eroded their financial health and their ability to maintain and replace vital infrastructure.

Rates have been and will remain a critical battleground, with councils saying that too many organisations are claiming rate exemptions, apartment owners are living the high life at their expense and that they are stuck covering rate concessions from people on low incomes.

But the idea of replacing pensioners’ rates concessions with a deferral scheme is liable to stir up a hornet’s nest of resentment among seniors and organisations representing them.

The IPART proposal is to allow eligible pensioners to defer their rates payment up to the current level of concession (or another amount set by the state government) and instead pay it back when their property is sold and a surviving spouse no longer lives there. The amount would be charged interest at the state government’s 10-year borrowing rate plus an administrative fee.

Submissions on the draft report can be made until October 14. There are also public hearings on September 19 in Sydney and October 10 in Dubbo. The final report is expected by December.

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