So, you’ve bought a property! Congratulations! We know what a huge amount of time, planning and saving that takes.
Unfortunately, as a property owner the costs don’t start and end with your home loan, renovations, or buying new furniture. There are plenty of additional fees, charges and taxes that you may not be aware of, if you have only previously rented or lived with family.
One of these costs is paying your local council rates, and we’ve broken it all down for you below.
What are council rates?
Council rates are a type of property tax that are paid by property owners within a municipality (a district with a local government).
Council rates make up 3.6% of the taxes that the Federal and State governments receive.
Why do we pay council rates?
Rates ensure councils get the funds they need to provide particular services to their local community.
These services can include:
- waste collection
- infrastructure maintenance (including roads, sporting, and recreation facilities)
- childcare and kindergartens
- town planning
- public space maintenance (including parks and gardens)
Fun fact: Victoria has 79 local government districts and councils.
When are rates paid?
Rates have to be paid four times a year, by the end of months: September, November, February and May. If you have the cash on hand, you can also elect to pay in full once a year and get it all over and done with.
If you do not pay your rates, they will become a debt to the property and interest will be charged.
To find out what interest and interest rates are, read our blog!
However, there are circumstances where your rates can be deferred if you’re suffering extreme financial hardship.
How are council rates calculated?
Here are the steps councils take to calculate your rates yearly:
- Councils determine how much money they’ll need to continue to provide community services to their municipality.
- This amount is then divided by the number of rateable properties in the local area. The result of this is the ‘rate in the dollar’.
- The value of each rateable property is multiplied by the rate in the dollar amount to determine how much each property owner must pay.
- Your general rates are now calculated, and any municipal and waste charges will be added.
Note: Municipal charges are used to cover council admin costs such as finance, asset management, human resources, and governance.
See below for Victoria Councils rate calculation diagram.
How are properties valued?
Your property valuation is determined by council valuers, every two years and will vary across your community.
Various valuations will be available on your rate notice, including ‘Capital Improved Value’ (the total market value of your property and additions) and ‘Site Value’ (the total value of the land).
Now that you know what council rates are and how they work, you can start saving some money throughout the year, so you don’t get caught out by unexpected costs each quarter.
If you’re looking for budgeting advice to keep up with your household costs and bills, click here!
If you’re not quite at the stage where you’re paying council rates yet but you’re exploring the option of purchasing property for the first time, read our step-by-step guide to buying a house here!