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                    How your rates are calculated

                    Victorian terrace house
                    How much you pay for rates depends on the value of your property. The Valuer General conducts revaluations of all properties every year which are used by Council to calculate rates according to the value of each property.

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                    Rate discount 2021-22 – FAQs

                    Council has introduced a rate discount. What does this mean?

                    We recognise that many property owners are still struggling with the ongoing impacts of COVID-19 which is why we are absorbing the cost of this year’s rates increase by applying a one off discount of 1.5 per cent on all rateable properties for the 2021-22 financial year. 

                    City of Melbourne is entitled to implement the Victorian Government’s 1.5 per cent rate cap but made the decision to apply a 1.5 per cent rates discount this year. This effectively cancels out a rates increase to overall rate base in 2021-22. Council is absorbing $4.8 million in potential rates income by applying this discount.

                    How is this discount calculated?

                    ​It’s a flat rate of 1.5 per cent off the annual council rate charge.

                    Will everyone get the rate discount?

                    Yes – every residential and commercial ratepayer will have the discount applied to their bill.

                    How much discount each ratepayer will see on their individual bill will differ according to the valuation of their property. 

                    Rates change every year as property values change. Property valuations are market-driven and determined by the Victorian Government. 

                    This means that individual rates will vary even with the discount in place, so some ratepayers may see the total of their bill go up because their property value may have changed relative to others. 

                    Can the discount be applied to Fire Service Property Levy (FSPL)?

                    ​No – this discount is independent of the FSPL. The FSPL is levied by the State Revenue office. Melbourne City Council is the collection agency on behalf of the Victorian Government and all income raised from this levy is passed to the Victorian Government.

                    Can the discount be assessed retrospectively?

                    ​No, the rate discount is only for 2021-22 financial year.

                    Do I need to apply for the discount?

                    ​You don’t need to apply for the discount – it has already been calculated and itemised on your rate notice.

                    Why not apply another rates freeze like last year?

                    Rates contribute around 67 per cent of Council’s revenue and are necessary to support vital community services and infrastructure. 

                    A rate freeze this year would have equated to $50.1 million in lost revenue compounded over 10 years. This would have created a major financial burden for future councils and their ratepayers. 

                    The fairest option was to apply the rate increase, but implement a discount. Council is absorbing $4.8 million in potential rates income by applying this discount.

                    Where can I get help if I am struggling to pay my rates bill?

                    ​If you are affected by COVID-19 and having difficulty paying outstanding rates, you may be able to apply for rate relief, defer your payments or set up a payment plan through our Rates Financial Hardship Policy.

                    Are you having difficulty paying your rates
                    Find out more about our Rates Financial Hardship Policy for eligible ratepayers.

                    How rates are calculated

                    We use the Net Annual Value (NAV) method for calculating rates. For residential properties this is five per cent of the property’s value. 

                    NAV for non-residential properties is approximately the annual market net rental of the property less all necessary expenses required to maintain that property, except Council rates. 

                    NAV cannot be less than five per cent of Capital Improved Value (CIV).

                    Rates are calculated based on the combination of two variables: the rate in the dollar and the valuation.

                    The formula for calculating rates is:
                    Net Annual Value (NAV) x rate in the dollar = rate payable

                    For example, in 2023-24 the City of Melbourne required revenue of $851 million of which rates contribute $376 million to cover its expected costs. To raise this sum, using NAV as the basis, it was calculated that residential properties pay 3.78 cents for every dollar of their NAV, while non-residential properties pay 4.22 cents in the dollar on their NAV.

                    Find out more about local government council rates and rate capping.

                    How is the rate in the dollar calculated?

                    Through the annual budget process Melbourne City Council determines the amount of revenue to raise in general rates required to maintain our services. We then divide this amount by the total value of the properties within the City of Melbourne municipality (this amount changes every year). The resulting figure is called the  rate in the dollar. For 2023-24 the total revenue was increased by 3.5 per cent as per the rate cap.

                    What is rate capping?

                    Rate capping was introduced by the Victorian Government on 1 July 2016. Rate capping limits the amount councils may increase overall total general rates from the previous year as of 30 June, without seeking additional approvals.

                    It doesn’t apply to individual rate notices, so your bill may be more or less depending on how your property valuation compares to others.

                    The rate cap applies to general rates. It does not apply to waste charges or the state’s fire services property levy.

                    What is the rate cap amount?

                    ​ The rate cap for 2023-24 is 3.5 per cent. Previous rate caps (based on CPI) have been:

                    • 2022-23: 1.75%
                    • 2021-22: 1.5%
                    • 2020-21: 2.00%
                    • 2019-20: 2.50%
                    • 2018-19: 2.25%

                    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 – 4.4
                    • 2012 to 2013 – 3.9
                    • 2013 to 2014 – 4.1
                    • 2014 to 2015 – 4.0
                    • 2015 to 2016 – 4.2
                    • 2016 to 2017 – 4.1 
                    • 2017 to 2018 – 4.1 
                    • 2018 to 2019 – 4.0
                    • 2019 to 2020 – 4.11
                    • 2020 to 2021 – 4.10
                    • 2021 to 2022 – 4.21
                    • 2022 to 2023 – 3.6
                    • 2023 to 2024 –​ 3.78 (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 – 5.2
                    • 2012 to 2013 – 4.6
                    • 2013 to 2014 – 4.8
                    • 2014 to 2015 – 4.6
                    • 2015 to 2016 – 4.8
                    • 2016 to 2017 – 4.5
                    • 2017 to 2018 – 4.6
                    • 2018 to 2019 – 4.6
                    • 2019 to 2020 – 4.5
                    • 2020 to 2021 – 4.4
                    • 2021 to 2022 – 4.8 
                    • ​2022 to 2023 – 4.2
                    • 2023 to 2024 – 4.2 (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.

                    More information

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