Local Government Rating Reform

Review of the rate peg methodology

IPART has commenced a review into the methodology used to set the local government rate peg.

IPART is consulting extensively as part of this review and is interested in all stakeholder views. IPART want to hear from stakeholders, including both councils and ratepayers, about what is and isn’t working with the rate peg, and how it could be improved.

Workshops on the rate peg methodology will be held in November and early December with a Draft Report to be released in February 2023. A public hearing will be held in 2023 after the Draft Report is released.

Further information can be found on the IPART website.

Recent rating legislative changes

The NSW Government is committed to strengthening the performance and sustainability of local government. To deliver on that commitment, the Minister for Local Government introduced a Bill containing a series of sensible reforms developed collaboratively with the local government sector as part of an extensive public consultation process.

That Bill, now the Local Government Amendment Act 2021 was passed by the NSW Parliament on 13 May and assented to on 24 May 2021.  A copy of that law as passed by the Parliament made be viewed here.

This law provides for changes that implement the Government’s commitments to rating reform and enables superannuation contribution payments for councillors. It also aligns terms of office of chairpersons for county councils and joint organisations to their member councils and allows greater flexibility in the administration of elections.

Guidance about immediate changes to the rating system

Guidance on local government rating reforms has been prepared to assist NSW councils with reforms to the rating system that were made through the Local Government Amendment Act 2021. The Guidance covers four rating reforms that came into effect immediately on 24 May 2021. These are:

1. allowing each council created by merger in 2016 to harmonise its rating structures gradually, over up to 8 years, in consultation with its community

2. enabling a different rate peg to be set for each council, or for different cohorts or councils, and allowing it to be set as a methodology rather than a percentage, including by specifying a base percentage to which an additional figure may be added in specified circumstances

3. allowing all councils to set separate rates for different residential areas within a contiguous urban area, in certain circumstances, whether or not they have different ‘centres of population’, and

4. allowing all councils to set farmland rates based on geographic locatio

Guidance on local government rating reforms can be found here.   The Guidance also provides an overview of the 6 reforms yet to commence.

The Circular relating to the Guidance on local government rating reforms can be found here.

On 25 June 2021 the Office of Local Government held a webinar for local government about changes to the rating system arising from the Local Government Amendment Act 2021.

A recording of the webinar may be viewed here and a copy of the presentation slides are available to download here.

New rate peg methodology to raise funds for growing councils and communities

The NSW Government introduced a population growth factor in the annual rate peg commencing from July 2022 to raise much-needed additional revenue for councils to fund key infrastructure in growing communities.

On 5 October 2021 the Minister for Local Government released IPART’s final report following its review of the rate peg methodology to accommodate population growth and accepted IPART’s recommendations.

To prepare for this important reform, an amendment was made to the Local Government Act in May 2021 to allow multiple rate pegs to be set.

Councils with growing residential populations are now able to raise notional general income by an additional population factor as part of the rate peg from 2022-23.

IPART estimates that this population growth factor would have generated an additional $287 million in rates revenue for local government in NSW over the past four years, with individual councils having received up to $86 million in extra income. 

The new population factor is different for each council, adding any increase to its residential population, as published by the Australian Bureau of Statistics, and then deducting revenue that council has received from supplementary valuations.

More information about IPART’s review of the rate peg to accommodate population growth can be found on its website here.