Homeowners across the Illawarra received their Notice of Valuation in the mail this week, and the astronomic land value rises contained within the letters have prompted concerns from many about how much their council rates will also rise.
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There's a lot of confusion.
For instance, this is one of the posts doing the rounds on social media:
"I have today received my VALUER GENERAL land valuation for my home in Woonona. IT HAS DOUBLED. This means that my Council rates will double from just under $3,000 p.a. to just under $6,000 p.a."
No. Do not fear - while land values and council rates are closely linked, a doubling of the value of your land does not mean the same will happen to your council rates.
In short - council rates are inevitably going to increase, but - no matter your property's change in value - the increase will be much less than double.
Let's break it down
Each year, councils need to collect a certain amount of rates from property owners to fund their operations (staff wages, maintenance, services etc), and - like everything - this amount needs to go up to cover other rising costs.
The amount this big bucket of money can increase is set by the Independent Pricing and Regulatory Tribunal (IPART), and is usually determined either by a standard statewide rate peg amount, or by a Special Rates Variation.
(Note this whole process is under review, and there could soon be changes coming to the way IPART sets rates).
For example, in 2022/23, Wollongong council was allowed to increase rates by 1.8 per cent.
It's worth noting inflation has skyrocketed since then, so we should probably expect a significantly larger increase for 2023/24 - but it's certainly not going to be double!
Regardless, the take away from all this is that IPART caps the amount each council is allowed to collect in a financial year, and the individual council then has to divide up this amount between ratepayers.
Roughly, here's how they do it.
In Wollongong (and the process may be different depending on which council area you live in) residential ratepayers will see four parts that make up their bill.
A breakdown of this can be found on your first bill of each financial year.
There's a waste charge, which covers your bins being collected - and you can see how much this will increase each year by checking the council's annual plan when it's released, usually around April.
If you look at your first rates notice, you might see that on your waste bill is $421.60 if you've got the standard 120 litre red bin - but this could be higher of lower depending on the size and number of bins you have.
Next, there's a stormwater management charge, which goes towards maintaining flood and stormwater infrastructure. In 2022/23, residential ratepayers in Wollongong are paying $25 for this service.
Waste and stormwater tend to increase by whatever amount is needed to keep covering the cost of the service, and don't have much to do with your land value.
Then, there is a flat base rate that everyone pays to spread out the cost of rates fairly across the city. The base rate is only charged on residential land, and in 2022/23 it was $797.29.
Finally, there's a variable amount based on the value of your land and only this part - known as an ad valorum - is determined by land values. Valorum = values.
You can probably see this represented on your current rates bill with a rate in the dollar amount (e.g mine says 0.00202636), then your property's land value (as of July 2019) and then the total amount you need to pay.
So this is where the letter you received in the mail this week comes in.
To work out whether your ad valorum amount is going to go up by more or less than the average, you need to know the average increase across your council area.
So, in Wollongong, we know from the Valuer General that residential land values went up by 34.4 per cent from July 2021, and 75.2 per cent from July 2019.
The latter figure is the one you need to look at, as land values/council rates are on a three year cycle, and July 2019 was the last time the land values were used to determine the ad valorum part of council rates.
So if you've got your 2019 valuation on hand, and you can see that your land value has increased by more than 75 per cent, you may be up for a bigger than average increase to your ad valorum portion of your rates bill.
And if your land increased, but that increase was less than 75 per cent, the share of what you have to pay might go down.
Put another way, the amount each ratepayer will have to pay depends on whether their land valuation increase is above or below the average increase for their rating category in their local government area.
In general, higher values properties pay more and lower valued ones pay less - and this just shifts around a bit every few years depending on the way the land valuations have shifted.
To give you an indication of how this can work - this year, when the IPART-allowed rates increase was 1.8 per cent, the council reported that "low valued [residential] properties would have increases below 1.6 per cent, while higher valued properties will increase below that percentage".
But in pretty much all cases, your council rates will still go up because of that overall increase to the big bucket of money that's set by IPART.
Wollongong council usually releases its draft annual budget around April of May each year, and that's when we can start to see what this increase might be.
It's not easy to work out, and - with multiple government agencies, and levels of government involved - is understandable that people are confused.
You can object
Finally, just because your rates aren't going to double, doesn't mean you can't dispute your land value.
If you think your land value is too high - or too low, or wrong in any other way - the last date to object is March 31. You'll need to provide sales data from around July 2022 as evidence of your objection, or it will be disallowed.
Kate McIlwain
For more than a decade, I've helped the Illawarra Mercury set the news agenda across the region. Currently I'm the paper's health reporter - covering the stories of Illawarra workers and residents in the wake of a global pandemic and at a time where our health systems are stretched to the limit.
For more than a decade, I've helped the Illawarra Mercury set the news agenda across the region. Currently I'm the paper's health reporter - covering the stories of Illawarra workers and residents in the wake of a global pandemic and at a time where our health systems are stretched to the limit.
