Making rates fairer for families and farmers
No system of taxation is perfect, but we can make it fairer. Victoria's council rating system began in the mid-19th century. Last month, councils across the state united to call on the Victorian government to improve rates fairness and equity.
We know property owners do not like to receive their annual rates bill, and even fewer enjoy paying it. Yet councils rely on rates to provide more than 100 services for communities and maintain 85 per cent of Victoria's road network and other community facilities. Reform is long overdue. The changes we seek won't deliver extra revenue to councils, but they will make it fairer for existing ratepayers who currently subsidise those who don't pay rates. State legislation requires councils to provide rate exemptions to a range of commercial organisations, private sector activities and fee-for-service providers. Many of these exemptions had their origin and justification in a bygone social and economic era. We believe they are no longer justified and should be abolished.
For example, religious properties used for commercial purposes (such as retirement villages), mining land and gaming venues on Crown land do not pay rates. Electricity generators, solar and wind farms can make a payment in lieu of rates - but this is typically much lower than the rates they would pay based on the value of their property.
In Swan Hill municipality, three commercial solar farms make an estimated $284,000 payment in lieu of rates. Using Swan Hill's rate in the dollar, their rates contribution would amount to $1.74 million.
In metropolitan Melbourne, we know council rates draw on less than two per cent of communities' personal income. However, in Swan Hill around 4.9 per cent of the community's total personal income is required to meet the rates cost. If commercial solar farms paid their fair share, it would reduce the burden on other ratepayers in that Shire.
It is a similar story in Towong Shire, where a major energy company owns two facilities that contribute $51,000 in rates. If Towong applied its current business rate in the dollar that figure would increase to $751,000. This means Towong ratepayers are currently providing a $700,000 annual subsidy to international investors and other Australians - which is equal to around 11 per cent of the shire's total rate revenue.
Many of these exemptions had their origin and justification in a bygone social and economic era. We believe they are no longer justified and should be abolished.
Private schools and universities also do not pay rates, yet the majority of students do not live in the local community, with some coming from as far afield as overseas. These organisations charge fees and often host a range of commercial leases and activities.
Local mums and dads, businesses and farmers - who are all paying their rates - are subsidising the cost of council services such as local roads, traffic management, school crossings, parks and other facilities used by the students and their families.
I want to be clear about one point. Councils will not receive any extra rate revenue if these exemptions are abolished. This is because councils cannot collect more overall revenue than the rate cap set by the government - currently 2.5 per cent.
Removing the exemptions will simply mean more commercial and private organisations contribute their fair share towards council rates. For other ratepayers, this will be welcome relief. Nationally, local government collects only 3.6 cents of every tax dollar raised. Yet councils manage one third of Australia's infrastructure (worth $445 billion) including three quarters of the nation's total road network. Much of the responsibility for maintaining our roads falls to rural and regional councils.
The MAV is also seeking Victorian government assistance for smaller rural and regional municipalities who cannot achieve equity through the rates system.
Some smaller councils face a mismatch between their financial capacity and their responsibilities. They simply cannot collect enough revenue to provide all the expected local services and infrastructure.
To ensure communities do not miss out on essential services, we've called on the state to urgently establish a small councils funding program and a review of road and bridge responsibility split between councils and VicRoads. We are hopeful the government will adopt our proposed reforms in 2020. It's time for everyone to pay their fair share of rates, and for extra state assistance to be provided to smaller communities.
Cr Coral Ross is president of the Municipal Association of Victoria