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General News

5 January, 2023

Rate rise on the way as rate cap doubles

Local residents can expect their rates to rise in the coming financial year with the Victorian Government doubling the existing rate cap to 3.5 percent. The new cap has been announced for the 2023/2024 financial year and doubles the current rate cap...

By Riley Upton

Rate rise on the way as rate cap doubles - feature photo

Local residents can expect their rates to rise in the coming financial year with the Victorian Government doubling the existing rate cap to 3.5 percent.

The new cap has been announced for the 2023/2024 financial year and doubles the current rate cap of 1.75 percent in place for the 2022/2023 financial year.

The State Government introduced the Fair Go Rates system in 2016 to ease cost of living pressures on Victorians and to encourage sound financial management by local governments by capping how much councils could increase rates by each year.

According to the government, the decision on the rate cap for the upcoming financial year was guided by the Essential Services

Commission who recommended a cap of four percent, however the government lowered this to ease cost of living pressures.

While a higher rate cap means a greater income for councils through rates, Central Goldfields Shire Council CEO Lucy Roffey said the cap will see council’s income hamstrung.

“Rate capping is pegged to the Consumer Price Index (CPI) and it’s also based on the estimate of CPI increases identified by the Department of Treasury and Finance,” she said.

“A rate cap of 1.75 percent was set for this financial year while inflation was at seven percent.

“The issue is that if inflation is running at seven percent and our costs are usually higher than inflation, it puts a significant cost pressure on council to not raise the rates.

“This will cause some challenges for us when we’re putting together the 2023-24 budget because our costs have gone up more than CPI.

“We’ve all been taken by surprise by the major increase in CPI this year and at seven percent, we’ll be getting essentially half of that as a rate increase.”

While the Victorian Government sets the rate cap, individual councils decide whether to increase their rates in line with this and can set their rates lower than the cap.

Ms Roffey said it was unclear at this stage what the increased rate cap would look like for residents, noting council was aware of cost of living challenges.

“We’re committed to making rates affordable for people and we’ll be looking really closely at our budget so we stay within that rate cap,” she said.

“We normally get our property valuation data in April or May and if everyone’s property value goes up by the same percent, then everybody gets a 3.5 percent increase.

“What we often find is that farm valuations are going up much faster than urban valuations, so it’s often farmers who are impacted by that increase but we won’t know that definitively until those valuations are finalised.”

Ms Roffey said it’s likely the organisation’s capital works program will be impacted by the change in rate capping, with council to continue seeking financial assistance from the government.

“This may impact on things like our capital works program because in infrastructure, we know costs have gone up in some categories by 25 to 30 percent,” she said.

“We will continue to rely heavily on grants from the state and federal governments to enable us to maintain our assets.

“We have been very successful in receiving capital grants over the past couple of years and we’ll continue to apply for any grants we can to supplement our income to ensure we deliver the best services we can for the community.”

Minister for Local Government Melissa Horne said rate capping protected residents from steep increases in rates.

“The rate cap for the next financial year takes into account higher inflation and the need to protect Victorians from uncontrolled rate hikes, while ensuring councils can continue to deliver vital community services,” she said.

“Each council is responsible for setting rates within the rate cap based on the needs of their community.

“Community members have the chance to engage with their local councils as they make decisions about rate rises through their budget process each year.”

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