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Rating Review

The Victorian Government released its long-awaited report on its Rating Strategy Review, along with its response to the 56 recommendations on 21 December 2020.

Council made a submission and our CEO, Ali Wastie was a member of the Municipal Association of Victoria’s taskforce that also made a submission:

A large number of the recommendations have not been supported by the Government and in principle or qualified support has been provided on a number of the other recommendations.

The current COVID-19 environment has reduced the appetite of the Government to reform the rating system with priority given instead to reforms that support ratepayers experiencing financial hardship, enhancing transparency and consistency of decision making and laying the foundations for greater fairness and equity in the rating system. The Government has flagged that it will review the rate capping system at the end of 2021 (five years after its introduction).

One of the outcomes was the Government’s acceptance in full of the Panel’s recommendation that the Local Government Act describe rates as a tax for local government purposes. It clarifies for our communities that rates do not constitute a fee for service and that paying more in rates does not entitle a ratepayer to greater service levels. It needs to be remembered that whilst no one likes paying taxes, Councils receive roughly only 3.5 cents in every dollar of taxation. Yet Councils are increasingly depended upon to deliver vital community services, which was emphasised during the COVID pandemic.

Council RecommendationGovernment ReponseComments
Fairness and equity across Victorian LGA’s cannot be achieved through the rating system alone. Urgent State Government action is required to address the regressive relative nature of small rural and regional LGA rating. Rural and regional LGA’s could have their Rate Capping legislative obligations removed and still not achieve fiscal equity with their metropolitan counterparts. Their communities do not have the same financial capacity. For this reason, the State as the statutory source, authority and ultimately point of accountability for Victorian LGA’s needs to intervene. This intervention needs to achieve a fair and equitable match between small and regional rural LGA’s community fiscal capacity and their LGA’s asset and service responsibilities.There is no specific response to this recommendation in the Report. The following general comments have been made: The Victorian Government also believes local governments must take responsibility for their own rating decisions and levels.The rate capping system has been flagged for further review at the end of 2021 (5 years after coming into place).
The following exempt commercial activities, fees for service providers, private sector competing activities or defined categories of exemption should be revoked and made rateable: Solar/Wind Farms and Electricity Generators, Universities and Private Schools, Religious Property Holdings used for commercial purposes or not held and occupied by the legal entity providing the religious instruction/faith based services, RSL Gaming/Gaming venues on Crown Land, Mining, Crown land used for commercial purposesDo not support. The Government does not support reform that would remove current rate exemption arrangements. Such significant changes could increase business and investment uncertainty and risk during the coronavirus (COVID-19) pandemic and post-pandemic recovery.It would be appear that the timing for rate reform has been paused due to the pandemic.
Retain the option for differential rating. A number of best practice steps to be taken by councils when determining differential rates were outlined in the panel’s report.Supported in principle. The Government does not intend making any substantial changes to the arrangements for general rates, including new subordinate legislation. The Government is committed to ensuring that the use of differential rates meets the good practices described by the recommendation.
Council accepts that the use of property valuations as a driver for rates calculations represents a fair measure for a wealth based tax. The use of Capital Improved Value (CIV) is a common, transparent and sensible method for property taxation. It leads to the distribution of the rates burden based on asset ownership and when applied in conjunction with Rating differentials it provides for a more equitable distribution of rates.Do not support. As SV, NAV and CIV will continue to be calculated as per the Valuation of Land Act 1960 the Government believes it is important that councils retain autonomy to select either of these valuation bases for rates.None of Victoria’s 79 councils use SV rating and NAV valuations are aligned to residential CIV valuations.
The rationale for the Municipal Charge, including the 20 per cent limit, is not apparent. Municipal charges effectively set a floor or a minimum rate. This is a regressive form of taxation that is not directly related to ratepayer capacity to pay as measured by the relative value of their property.Do not support. The Government does not intend to make any substantial changes to the arrangements for general rates.Council does not have a municipal charge – our submission was aimed at removing this regressive form of property taxation.
The current Victorian rating regime’s capacity to be understood and to deliver fairness and equity would be enhanced by: Simplifying Rates Notices, Earlier Valuations Return Date, Option for Tourism Levy for Declared Tourist Destination LGA’s, Residential Villages to be RateableThe development of a template for rates notices to be used across councils is supported in full subject to the retention of prescribed information.No reference was made in the final Panel report for the other three recommendations and from BCSC’s perspective the Tourism levy outcome is particularly disappointing.