Council rates are a contribution each ratepayer makes towards community services provided by their local council. Rates also contribute to the cost of running your local council.
How much you pay depends on the value of your property. The City of Melbourne uses the Net Annual Value (NAV) as its basis for calculating rates. For residential properties, the NAV is a mandatory five per cent of the property’s value. For commercial properties, the NAV is based on the annual rental.
Residential and commercial rates are calculated using the total NAV figures and the Council's annual budget requirements.
Firstly, the City of Melbourne determines how much revenue it needs to raise to deliver its services and programs. Then it divides this sum by the NAV figure to calculate a rate in the dollar which is then applied to each property's NAV.
For example, in 2008-2009 the City of Melbourne required revenue of $166.9m to cover its expected costs. To raise this sum, using NAV as the basis, it was calculated that residential properties pay 4.5 cents for every dollar of their NAV, while commercial properties pay 5.3 cents in the dollar on their NAV.
Some properties, such as those owned by the Australian and Victorian governments, and those used for charitable purposes, are not subject to local government rates.
City of Melbourne rate in the dollar – residential
2000 to 2001 – 6.4
2001 to 2002 – 6.5
2002 to 2003 – 5.6
2003 to 2004 – 5.7
2004 to 2005 – 5.0
2005 to 2006 – 5.1
2006 to 2007 – 5.1
2007 to 2008 – 5.3
2008 to 2009 – 4.5
2009 to 2010 – 4.7
2010 to 2011 – 4.4
2011 to 2012 – 4.45 (rounded)
City of Melbourne rate in the dollar – non-residential
2000 to 2001 – 7.9
2001 to 2002 – 8.1
2002 to 2003 – 6.4
2003 to 2004 – 6.5
2004 to 2005 – 5.8
2005 to 2006 – 6.0
2006 to 2007 – 5.9
2007 to 2008 – 6.1
2008 to 2009 – 5.3
2009 to 2010 – 5.5
2010 to 2011 – 5.2
2011 to 2012 – 5.25 (rounded)
Differential rate
The City of Melbourne, like many other local governments, maintains a different rate for residential and business ratepayers. This helps to ensure that all ratepayers make a proportionate and reasonable contribution to the council. Many councils adopt differential rating but the City of Melbourne is the only local government to use Net Annual Value as well as differential rates.
Other uses of valuations
Other rating authorities use valuations made by municipal valuers. These other authorities contribute to the cost of making the valuation.
Water authorities such as City West Water, and South East Water use the valuations to calculate components of water rates. The State Revenue Office uses municipal valuations for the calculation of Land Tax.
The valuations are also used as a basis for levying councils for fire services.
In addition, the Commonwealth and Victoria Grants Commissions consider municipal valuations when making direct grants to municipalities.