Frequently asked questions (FAQs) about the rating and valuation strategy review are answered below.
These are also available to download: FAQ sheet(PDF, 199KB)
What are council rates?
Council rates are a form of property tax rather than a fee for service. Councils collect rates from property owners to fund programs, services and infrastructure that benefit the whole community. Property values are used as the basis for calculating how much each property owner pays.
Why do councils charge rates?
Rates are a vital revenue source for the City to fund a vast range of services, programs and infrastructure for the community such as waste and cleansing, sport and recreation, stormwater, emergency management, roads, parks and gardens, environmental planning, public health and much, much more.
How are rates calculated?
Rates are calculated each year during the City 's budget process. Council uses property values it receives from the Valuer-General as the basis for calculating how much each property owner pays in rates.
After identifying how much it needs to collect in rates and charges in its budget, the City calculates the total amount required to fund waste management services, food organics and garden organics collection services, stormwater removal services, the State Government fire levy and landfill rehabilitation services leaving the balance required from General Rates.
Generally, the rate in the dollar is calculated by dividing the total amount of money the City needs to raise to provide programs and services by the total $AAV of all rateable properties in the Hobart municipal area.
The rate in the dollar is then multiplied by the value of a property, using the AAV, to establish the amount to be paid by each property owner.
The total AAV of rateable properties within the municipality is $600,000,000 and the City needs to collect $44,000,000 in rates. The rate in the dollar is 7.33 cents (44,000,000 ÷ 600,000,000). The annual rates payable on a property with an AAV of 18,800 would be $1,378.04. Plus, any service rates and charges applicable to the property e.g., waste, food organics, garden organics, stormwater removal and the State Government fire levy and landfill levy.
What is a rating strategy?
A rating and valuation strategy is the method by which councils consider decisions about how rates will be raised from different properties in the municipal area. A rating strategy doesn't consider how much the City needs to raise from rates, this is calculated in the City 's budget. It instead determines how rates and charges will be equitably distributed amongst the City's ratepayers.
Why is the City of Hobart reviewing its rating strategy?
The purpose of the review is to:
- Determine the most appropriate Strategy for the City, which will fund the provision of programs and services for the community and the infrastructure required of a growing capital city now and into the future.
- Ensure that the money raised through rates in conjunction with other revenue sources will ensure the long-term financial sustainability of the City.
- Determine a fair and equitable method of raising revenue from rates.
- Determine how different properties should share the amount of rates to be paid.
- Ensure that the City has sufficient measures in place to support those suffering from financial hardship, including small business.
- Ensure that the City is an attractive place to do business and stimulates development activity and economic activity.
What are the City of Hobart's objectives for a new rating strategy?
The City is looking to achieve the following objectives:
- Having a rating structure that provides fairness and equity for the whole City of Hobart.
- Having a rating structure that is sustainable for the City and affordable for the community.
- Having a rating structure that supports ratepayers capacity to pay; and
- Having a rating structure that is simple to understand and easy/cost effective to administer.
Why has Council decided to change from rating using Assessed Annual Value to Capital Value?
Under section 89A of the Local Government Act 1993 Council has the choice of three bases of value of land:
- Land Value (LV) - the value of the property excluding all visible improvements such as buildings, structure, fixtures, roads, etc.
- Capital Value (CV) - the total value of the property, excluding plant and machinery and includes the land value; or
- Assessed Annual Value (AAV) - the estimated yearly rental value of the property, excluding GST, council rates and land tax, but is not to be less than 4% of the capital value of the property.
The Council 's review found that Capital Value demonstrates the strongest performance of the three bases against the principles of taxation. It is easiest to understand, most equitable (particularly in terms of capacity to pay) and is the least volatile in a property market where property value is growing at a different rate to rental values. Utilising Capital Value as the basis for rates allows the City to adopt differential rating, which may better reflect capacity to pay rather than the alternatives and provides council with the flexibility to levy differential rates.
When will rating using Capital Value start?
1 July 2024 for the 2024-25 rating year.
Will a new rating strategy mean that Council will raise more rates revenue?
No. The Council will not receive any extra rates revenue from any changes. Council 's rates revenue can only be increased by Council each year during its budget process. The options only affect how rates are calculated and distributed amongst ratepayers.
Are the options in the Options Paper the only options available?
No, the Council has selected a number of options but these are not the only options.
All rating options provide different ways to distribute the cost of providing Council program and services among ratepayers. As all municipal areas are different, individual councils need to determine the method that distributes the rates tax burden in the most appropriate way for their community.
If you have feedback or your own suggestions we 'd love to hear them. You are encouraged to make a submission in writing to the City.
When will the decided option be implemented?
The City 's new Rating and Valuation Strategy will take effect from 1 July 2024 for the 2024-25 rating year.
Will it mean that commercial properties and businesses will pay more in rates?
The City has modelled the outcomes of moving to rating using Capital Value. A move from using AAV (existing differential model for 2023-24) as the valuation base to Capital Value was modelled using a differential General Rate to mitigate the shift in the rate burden, calculated by assuming each land use category will contribute the same proportion of rate revenue than they currently do under AAV for the 2023-24 rating year.
This effectively means that the rate burden would be the same as under the 2023-24 (current) rating structure which uses AAV.
The modelling found that if Council continues with its differential rating strategy and charges each land use a similar amount of rates it does currently under AAV that most ratepayers will only experience a minor change to their rate While that's the outcome for most ratepayers, as with any change to the rates some properties would pay more and some would pay less. It is not the case that all commercial properties would pay more.
How can I enquire about my council rates generally?
For more information on Council rates and charges please contact Council's Rates Office on:
Call: 03 6238 2787