Council rate to rise for NSW property owners in 2022

Council rate rise is due to be implemented across most of NSW next July to help fund local infrastructure and services. 

The Independent Pricing and Regulatory Tribunal (IPART) report has set the 2021-22 rate peg for NSW councils at 2.0 per cent. The rate peg is the maximum percentage amount by which a council may increase its general income for the year. 

As you may know, rates which are levied annually, usually make up about half of a council’s income and they are a form of property tax. To calculate how much each property owner pays in rates, they need to determine the total amount of rate revenue required and divide this amount across the total value of all rateable properties. 

Minister for Local Government Shelly Hancock said at the moment the councils have been focused on raising more revenue and she believes that this was the most equitable way to do so. 

“This revenue injection will be pivotal in helping local councils overcome growing pains with a reliable and sustainable revenue stream,” said Ms Hancock.

“It will provide key infrastructure for growing communities into the future including roads, drainage and open space.

Under the present system, the level of rate income received by councils isn’t enough to cover the increased costs in the wake of population growth. 

NSW caps the total amount of revenue councils can collect through a rate pegging system in which population growth was left out of the equation.

“For councils with growing populations this can result in a reduction in service levels or deteriorating assets because they do not collect enough revenue,” Acting chair of IPART Deborah Cope said.

Ms Cope said IPART has looked at a way to incorporate population growth estimates into the rate peg. She estimated the cost increase would have raised an extra $116 million for NSW councils over the past four years, if it had been in place. 

“The methodology we have proposed will ensure councils maintain their rates income in a per capita basis as their population grows.

“While the impact on individual ratepayers may vary, on average new ratepayers will pay most of the additional rates revenue.

“Given this, our view is additional protections for existing ratepayers are not necessary at this stage.”

The change will apply across all of NSW except for the City of Sydney council area for the relationship between costs and population growth for City of Sydney is not linear – requiring a different approach. 

Minister Hancock said there will be a consultation process and stakeholders need to submit feedback by August 6. IPART is due to lodge its final report with the Government in September and the new system is expected to be implemented from July 2022.